A repo rate that communicates the market participants’ economic expectations. Put another way, it is a forward rate that reflects the participants’ probability-weighted mean value for what the repo rate is expected to be in the future. The future repo rate moves are mainly determined by market volatility. It is also affected by changes in the monetary policy rate (such changes have a direct impact on the short-term interest rates in the economy).

The financial markets’ average forecast for the future repo rate is the basis for deriving the implied forward interest rates. If, for example, the annual interest rate for Treasury bonds is higher for long maturities than for short ones, it could be inferred that the market expects an increase in the repo rate. In addition to policy expectations, forward rates contain risk premiums (positive and negative alike). Risk premiums in forward rates are mainly caused by investors demanding compensation for uncertainty about the future course of interest rates.

A future repo rate is usually monitored while the fixed-income markets are open for trading.