UKRAINE: BBG-Meloni Pushes For NATO-Like Collective Defence Security Guarantee

• 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

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

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.