December Rates Recap

Eurodollar open interest advances 17%

Eurodollar futures and options liquidity continues to deepen with both volume and open interest on pace for a record year:

  • Over 70M contracts of open interest held on average in 2019, +17% YoY
  • Over 4.5M contracts traded daily in 2019, +4% YoY

SOFR futures positioning ahead of year-end turn drives record OI

Despite seeing 83K contracts roll off with the expiration of the October SR1 contract, SOFR futures open interest swiftly rebounded in November, reaching a record 573K contracts on average daily volume of 48K contracts:

  • 1M SOFR futures continue to serve as a useful and liquid hedging tool for overnight repo, especially during periods more susceptible to funding pressure such as quarter-end and year-end. Open interest in the DEC 2019 (SR1Z9) and JAN 2020 (SR1F0) contracts surged by 66% in November.
  • Relative value trading vs. Fed Funds and Eurodollars accounted for 31% of SOFR volume
  • Large OI holders hit a new high of 152 in the Nov. 26 CFTC COT report

Strong client interest ahead of Jan 6 SOFR options launch*

Industry readiness for 3-Month SOFR options (SR3) is ramping up ahead of the January 6 launch*. As the first listed non-linear SOFR product, SOFR options will further assist with the market’s adoption of SOFR as a reference rate, and in its usefulness as a Treasury Repo Index.

New resources available on our SOFR options page:

  • FAQ
  • Vendor codes
  • Expiration date examples

View latest SOFR options resources

Ultra 10 continues outsized growth in its fourth year

Ultra 10-Year T-Note futures (TN) continue to play an expanded role in portfolios, with OI hitting a record 954K contracts on Nov. 25, accounting for a record 6% of Treasury futures OI:

  • Avg. daily OI +30% YTD (UST futures +20%)
  • ADV +25% YTD to 235K contracts (UST futures +7%)
  • Large OI holders hit a new high of 117 in the Nov. 19 CFTC COT report

More on Ultra 10

Treasury curve trading surges

Inter-Commodity Spreads (ICS) offer efficient execution of curve trades between Treasury futures contracts with reduced leg risk.

  • YTD, 25K spread combinations trade daily, resulting in average daily volume of over 127K contracts, +84% YoY
  • 5Y vs. 10Y (FYT) ICS is the most actively traded
  • Biggest growth seen in 2Y vs. 5Y (TUF) ICS, which is more cost-efficient since the 2Y tick cut

More on ICS

Portfolio margining enhancements

Recent enhancements to portfolio margining of futures and cleared OTC swaps strengthen the capital efficiencies available for client Interest Rate portfolios.

Resulting efficiencies for futures vs. IRS strategies cleared at CME**:

  • Margin efficiencies as high as 96.8% for Eurodollar convexity bias strategies
  • Margin efficiencies of up to 81% for Invoice Swap Spreads (packaged trades between swaps and UST futures, providing an off-balance-sheet alternative to swap spreads)

More on portfolio margining

Data as of November 29, 2019, unless otherwise specified
*Pending regulatory approval
**Margin efficiencies are indicative only and are subject to change