February Rates Recap

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Record Invoice Swap Spread trading following changes to Rule 538

  • Invoice Swap Spreads using CBOT Treasury futures provide off-balance-sheet, capital-efficient swap spread exposure, with up to 80% margin offsets.
  • Last October, CME Group made changes to Rule 538, allowing many new invoice spread combinations (e.g. calendar rolls and tenor switches) via EFRP.
  • January 2017 Invoice Spread ADV reached $7.9 billion, the highest single-month in its history.

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Ultra 10 volume reaches new highs

After one year since launch, Ultra 10-Year U.S. Treasury Note futures ADV reached 110K (on a 3-month moving average basis) and OI reached 310K.

Winner: FOW 2016 “Most Innovative Launch”
Winner: Risk 2017 “Exchange Innovation of the Year”

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Breadth of participation in Interest Rate futures reaches new heights

Large Open Interest Holders, as reported by the CFTC’s Commitment of Traders report, is a key metric for tracking breadth of participation and is proportional to overall liquidity.

In the report dated 01/24/2017, the aggregate number of large participants reached 1,756 – a new all-time high. Additionally, new highs were reached for the Ultra 10-Year future (56) and the 5-Year Note future (308).

Read our latest paper on liquidity


Treasury options ADV +21% YoY in January, driven by electronic trading

  • 73% of Treasury options volume (549K contracts daily) traded electronically on CME Globex, as traders capitalize on greater transparency, 24-hour access and increased liquidity.
  • Futures OI reached near record 9.273M at the end of January, supporting volumes and liquidity in options.
  • Technology enhancements, such as Inter-Commodity options spreads and cabinets, have streamlined the workflows for brokers and traders.

Economic Outlook

By Blu Putnam, Chief Economist

The Federal Reserve (Fed) will have plenty to debate at its March 14-15 FOMC meeting.

Unemployment is below 5%, and inflation is clearly heading above the Fed’s 2% target during 2017. Indeed, given trade and tax policy ideas being floated in Washington by the Republican Administration, inflation could push higher, faster than one might have previously estimated, perhaps well into 3% territory in 2018. Even a data-dependent Fed will be considering more rate hikes. And, aside from considering the timing of another rate increase, the FOMC will be discussing when to start shrinking the balance sheet by eliminating its policy of re-investing interest and principal it receives. 

This policy shift could be a huge signal that more rate increases are coming and that the shape of the yield curve is in play. Letting the balance sheet start to shrink is akin to draining excess reserves from the banking system. Prior to the 2008 financial crisis and quantitative easing, when the Fed wanted to push rates upward, it drained reserves. Put another way, raising rates and keeping the balance sheet stable at $4.5 trillion are inconsistent policies. Is it time to remove the inconsistency?

View 2017 Rate Hike Probabilities


2017 Eurodollar & Treasury Option Expiration Calendars

Quickly find key dates and symbols for quarterly, serial, and weekly Interest Rate options.

View Treasury Calendar

View Eurodollar Calendar

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