SOFR is the quiet, unglamorous rate that tells you what it costs to borrow cash overnight in the core of the financial system. Think of it as the pressure gauge on the plumbing. Banks, dealers, hedge funds..they all live off this rate. When it moves, it’s usually because something underneath is changing, not because anyone’s feeling optimistic.

Seeing SOFR down at 3.64%, the lowest since 2022, is the system saying short term money just got easier again.

What That Really Means

This isn’t a victory lap. You don’t get sustained drops in overnight funding costs because the economy is ripping. You get them because demand is cooling, risk is being managed down, and policymakers are trying to take stress out of the system before it shows up somewhere more visible.

My View

The Fed is quietly easing the plumbing while the economy loses momentum. Cheaper overnight money helps keep banks and markets functioning, but it’s also a signal that the growth backdrop isn’t strong enough to tolerate tight conditions anymore. Historically, that combination shows up late cycle..not at the start of a boom, but as a cushion on the way down.

The pipes are clearing. Not because everything’s fine but because the system can’t afford for them to stay clogged.