February Rates Recap

BoE policy uncertainty drives record trading in SONIA futures and record traffic to BoEWatch tool

Following the Bank of England's decision to leave their target rate unchanged at the 30 January MPC meeting, market participants are now looking to the March meeting where the probability of a rate cut has fluctuated between 25% and 65% according to the prices of MPC SONIA futures interpreted by the CME BoEWatch tool.  

In recent weeks, amidst a mixed bag of economic data, CME’s BoEWatch tool saw record traffic as traders and media outlets (WSJ, FT, The Times, The Guardian, and others) turned to CME for insights into rate expectations.

Likewise, CME MPC SONIA futures, which power the BoEWatch tool and provide a precise hedging instrument aligned to BoE meeting dates, saw record trading volumes and open interest.

View latest BoE rate probabilities for 2020

SOFR ecosystem recap

The SOFR market saw considerable expansion in 2019 as cash market adoption and swap clearing complemented the strong buildup in CME SOFR futures liquidity.

SOFR's momentum continued into January 2020:

  • SOFR futures volume exceeded 40K contracts/day while the global participant pool deepened to 375+ 
  • SOFR options launched with numerous initial trades
  • Cleared SOFR swaps saw record participation with 18 firms clearing $9.9B in SOFR swaps
  • The cash market saw FRN issuance of $13.9B, including over $10B at the 3-year tenor*

2019 SOFR Ecosystem Recap

Interest Rate futures liquidity update

Read our updated whitepaper examining the multi-dimensional measures of interest rates liquidity in 2019, including the quality of the central limit order book (CLOB), daily trading volumes, breadth of participation, and open interest.

Interest Rate Futures Liquidity Update

20-Year: New bond on the block

In a new blog post, Global Head of Research, Owain Johnson, assesses the impact of a 20-year UST bond:

  • Fits with the trend towards longer-dated exposures and should find a ready audience
  • Launch is likely to enhance liquidity in both cash and futures markets, creating new opportunities
  • Will be eligible for delivery into CME Group’s US Treasury Bond futures contract
  • Will be eligible for trading on BrokerTec**

How 20-Year Bonds will fit in Rates Markets

Relative value traders see record savings through portfolio margining

Offering unmatched efficiencies for listed rates vs. cleared swaps strategies, CME's newly enhanced portfolio margining solution is driving more clients to clear their USD swaps at CME.

In 2019, bolstered by record activity in Treasury Invoice Spread and Eurodollar Convexity packages, over 890 accounts leveraged portfolio margining to save a record $6 billion in daily initial margin, more than double the savings seen in 2018.

With dealer desks providing strong liquidity at CME, USD swap clearing volumes increased 22% YoY to $89 billion in daily notional.

Source: CME Group

More on portfolio margining

New options tool: CME Globex Trade Browser

Gain insight into electronic options flow with intra-day and one-week historical CME Globex trade data showing most active strategies, quantity and price.

Try it out

Data as of January 31, 2020, unless otherwise specified.

* Source: Bloomberg
** BrokerTec Americas LLC, a registered broker-dealer with the U.S. Securities and Exchange Commission, a member of the Financial Industry Regulatory Authority, Inc