In response to client demand and to enable greater price discovery and cost-effective execution, the minimum price increment for 2-Year Note futures (ZT) was reduced by half (to 1/8 of 1/32nd) on January 13.
In the three weeks since:
|
Avg Top of Book |
% of Time at Minimum Tick |
---|---|---|
Jan 14-18 |
1,037 |
96.3% |
Jan 22-25 |
1,020 |
91.1% |
Jan 28-31 |
1,240 |
94.3% |
Size |
Jan 7-11 |
Jan 14-Feb 1 |
Cost Change* |
---|---|---|---|
1,000 lots |
0.259 |
0.167 |
-36% |
5,000 lots |
0.323 |
0.288 |
-11% |
5,000 lots represents $1B notional, among the largest trades executed in the electronic central limit order book. Larger size trades may theoretically show higher cost of execution but are not commonly executed as a single aggressing order.
The SOFR market saw considerable expansion in January 2019 with both futures trading volumes and cash issuance reaching record highs.
SOFR FUTURES
CASH MARKET
WHAT TO WATCH
Over the last two months, amidst growing uncertainty surrounding the 2019 course of Fed policy, daily volume in Fed Funds futures has surged to over 356K, +37% vs. 2018.
CME FedWatch, which has shown large swings in target rate probabilities since December, currently projects a 9% chance of one rake hike, an 84% chance of no change, and a 7% chance of a rate cut by the December 2019 FOMC meeting (as of 2/4/19 at 12:00 pm CT).
Data as of February 1, 2019, unless otherwise specified
*Cost change calculated based on actual book composition
**Notional shown for illustrative purposes only, computed based on the value of an equivalent money market instrument with the same dollar-value-of-basis-point (DV01)
***Source: Bloomberg, compiled by CME Group