UKRAINE: BBG-Meloni Pushes For NATO-Like Collective Defence Security Guarantee
Bloomberg reports that Italian PM Giorgia Meloni is pushing for security guarantees for Ukraine that, under the scenario of a peace deal or ceasefire being in place, would see its allies decide within 24 hours of a renewed Russian attack whether to provide military support to Kyiv. The plan would appear to be a watered-down version of NATO's Article 5 collective defence pact, which (ostensibly) obliges NATO countries to militarily intervene as 'an attack on one is an attack on all'.
- BBG: "The options would then include providing Kyiv with rapid and sustained defense support, economic assistance, bolstering the Ukrainian military as well as imposing sanctions on Russia, the people said."
- Speaking at the White House on 18 Aug, Meloni said, “I’m happy that we will begin from a proposal, which is, let’s say, the Article 5 model, which was Italian at the beginning. We’re always ready to bring our proposals for peace, for dialogue — it’s something we have to build together,”
- Meloni faces a difficult balancing act, not only between US President Donald Trump and the EU, but domestically. The right-wing populist Lega of Deputy PM Matteo Salvini is significantly less inclined to commit further resources to supporting Kyiv, with its stance aligned with EU leaders such as Hungary's Viktor Orban and Slovakia's Robert Fico.
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MNI EXCLUSIVE: Interviews With Former Fed Assistant General Counsel
- MNI interviews former assistant general counsel to the Fed's Board of Governors on threats to Fed independence -- On MNI Policy MainWire now, for more details please contact sales@marketnews.com
US TSYS/OVERNIGHT REPO: SOFR Softens, But Tsy Cash Raise To Reapply Pressure
Secured rates pulled back sharply Friday, with SOFR dropping 4bp to 4.30%. That's the lowest print of July so far (last this low on Jun 24), and is almost certainly attributable to the usual monthly cash inflow into the market from Government Sponsored Enterprises. Those inflows will reverse out later this week, with upside pressure potentially exacerbated by net Treasury cash raising through Bill settlements ($35B Tuesday, $32B Thursday) as it rebuilds the TGA post-debt limit raise.
- Effective Fed funds remained unchanged as usual at 4.33%.
REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.30%, -0.04%, $2775B
* Broad General Collateral Rate (BGCR): 4.29%, -0.04%, $1119B
* Tri-Party General Collateral Rate (TGCR): 4.29%, -0.04%, $1085B
New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume: $110B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume: $277B
JAPAN: PM Dealt Significant Blow In House Of Councillors Election Defeat
Prime Minister Shigeru Ishiba faces a period of significant political uncertainty following the poor performance of the governing coalition in the 20 July House of Councillors election. With 125 of the 248 Councillors' seats up for election, Ishiba's conservative Liberal Democratic Party (LDP) won 39, representing a loss of 14 from before the election. The LDP's coalition partner, the centrist social conservative Kometio, won eight seats, a loss of six. These losses mean that the combined seat total for LDP-Komeito falls to 122, below the 125 majority threshold.
- In terms of passing legislation, Ishiba will now be required to gain the backing of opposition parties or independents in the House of Councillors as well as the House of Representatives. This risks delays or significant alterations to legislation. The most likely parties to cooperate with the gov't are the fiscal populist Democratic Party for the People (DPFP) or the libertarian Japan Innovation Party (Ishin).
- Having lost the gov'ts majorities in both chambers, there is likely to be a groundswell of LDP opposition to Ishiba remaining in office, especially from the party's conservative wing. Ishiba has pledged to remain in office to deal with US tariff talks, and while there is no formal mechanism to remove an LDP leader from within, should enough lawmakers publicly back Ishiba's removal the PM's position could become untenable.
- The main gains came for the right-wing anti-immigration Sanseito (up from one to 15 seats) and the DPFP (up from 10 to 22).
Chart 1. House of Councillors Composition 2022 vs. 2025, Seats
Source: NHK, MNI. N.b. 125 Seats required for overall majority.
