August Rates Recap

SOFR Futures Trading Accelerates

  • 152K contracts traded since May 7, 2018 launch ($5M DV01)
  • July ADV: 3,423 contracts/day, +121% MoM
  • Record 7,180 contracts traded on August 3
  • Open Interest nearly doubled in July, reaching 23,383 contracts on July 30
  • Over 70 global participants
  • Privately negotiated block trade executed, representing $100K DV01 risk
  • Both outright and Intercommodity spread (ICS) blocks have begun trading

SOFR Home | SOFR Swaps Webinar

Financial Ecosystem Adoption of SOFR Takes Critical Steps Forward in July

July 25: Fannie Mae issued the first ever SOFR-based floating rate notes. The $6B in total issuance across three tenors was met with strong investor demand. 

  • 6mo – $2.5b (CUSIP 3136G4TF0)
  • 12mo – $2b (CUSIP 3136G4TG8)
  • 18mo – $1.5b (CUSIP 3136G4TH6)

July 27: CME Clearing confirmed that its existing collateral policy includes acceptance of floating rate U.S. government agencies for performance bond requirements, including floating rate notes anchored to the Secured Overnight Financing Rate (“SOFR”).

July 30: S&P recognized SOFR as an “anchor money market reference rate” in its principal stability fund ratings (PSFR) methodology

CME Clearing Notice 18-308

Volume Growth in Long-Dated Eurodollar Options

Long Green Eurodollar options, which have expiration dates between two-three years out, saw a significant increase in trading last month as the yield curve flattened. Over 120K contracts traded daily in July 2018 vs 30K per day in H1 2018. 

Analyze ED Options OI with the Heatmap Tool

Other options trends…

  • 2-Year Note options remain highly active, averaging 25K contracts per day 2018 YTD, +490% YoY
  • New Term Mid-Curves open interest has grown to 36K contracts
  • Over 6M Wednesday Treasury options have traded since June 2017 launch

More on Options

Data through August 6, 2018, unless otherwise specified.
Unless otherwise specified, all dates and months referenced are for 2018.

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Get Ready to Roll

The Sep-Dec Treasury roll is a few weeks away, with first notice set for August 31, 2018. Use our Pace of Roll tool to help inform your roll strategies.

Open interest in Treasury futures stands at 12.3M with a record 4.1M held in the 5-Year note.

Pace of Roll Tool

Growing Probability of Two More 2018 Rate Hikes

A hike to the target range of 225-250 bps at the December FOMC meeting was at 66% probability as of Aug 6 according to CME FedWatch.

CME FedWatch

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