The Z6 SOFR contract is the December 2026 three-month SOFR futures contract, where "Z" is the CME month code for December and "6" denotes the year. Its price implies the market's expected average SOFR over that delivery quarter, encoding cumulative Fed rate-cut expectations.
How it works
CME futures month codes run F-G-H-J-K-M-N-Q-U-V-X-Z for January through December; "Z6" therefore reads as December 2026. The three-month SOFR future settles to compound daily SOFR over the reference quarter, so its price (100 minus implied rate) translates directly into an expected average overnight rate, and the spread between sequential contracts implies the cumulative cuts or hikes priced over that horizon.
Why it matters now
With the Fed easing cycle the dominant 2025-2026 rates story, deferred SOFR contracts like Z6 are the cleanest read on how many cuts the curve has priced into year-end 2026 — a moving target the desk tracks against the dot plot and incoming labor data.
Example
In late 2025, the Z6 SOFR contract implied roughly 17 basis points of cuts priced for the year — well under a single full 25bp move — signalling that the market expected the Fed to pause near its terminal rate through December 2026 rather than ease aggressively.
Frequently asked
- What is the Z6 SOFR contract?
- The Z6 SOFR contract is the December 2026 three-month SOFR futures contract traded on CME. The "Z" is the standard futures month code for December and "6" denotes the year 2026. Its price encodes the market's expected average overnight SOFR rate over the December 2026 reference quarter, making it a direct read on priced Fed policy expectations.
- What does the 'Z' in Z6 mean?
- The "Z" in Z6 is the CME futures month code for December. Exchange month codes run F, G, H, J, K, M, N, Q, U, V, X, Z for January through December respectively. The trailing digit gives the year, so Z6 reads as December 2026 and Z5 would mean December 2025.
- How does a SOFR futures price imply rate cuts?
- A SOFR futures price implies expected rates because the contract quotes as 100 minus the rate; the implied rate equals 100 minus the price. Comparing the implied rate of a deferred contract like Z6 to the current SOFR level reveals how much easing the market has priced — in late 2025, Z6 implied roughly 17 basis points
Glossary · 25bp / bp
A basis point (bp) is one-hundredth of a percentage point (0.01%); 25bp equals 0.25 percentage points, the conventional increment of a single central-bank rate move. Policymakers quote rate changes, yields, and spreads in basis points to avoid the ambiguity of percentage-of-a-percentage phrasing.
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- How does the Z6 SOFR contract differ from the dot plot?
- The Z6 SOFR contract reflects market-priced expectations for December 2026 rates, while the dot plot reflects individual FOMC members' rate projections. The futures contract is tradeable, continuously updated, and risk-neutral; the dot plot is a quarterly snapshot of policymaker views. Divergence between the two signals where the market disagrees with the Fed's guidance.