January Rates Recap

Virtual Seminar: SOFR-based fallbacks for Eurodollars

  • Eurodollar futures and options remain the most flexible, highly traded, and widely referenced of the listed interest rate derivatives products in the global marketplace.
  • In addition, as SOFR adoption accelerates, we continue to offer clients liquid SOFR futures and options markets.
  • Join us for a virtual seminar on Tuesday, January 26, 2021 to discuss recent market developments and provide further details on our SOFR-based fallbacks. Sunil Cutinho, President of CME Clearing, and Agha Mirza, Global Head of Interest Rate products, will be presenting.
  • Submit discussion questions in advance to help shape the conversation by emailing interestrates@cmegroup.com.

SOFR adoption accelerates into year-end as futures reach record Q4

The SOFR market saw considerable expansion in 2020 with FRN issuance and cleared swaps volumes complementing the strong buildup of liquidity and trading in CME SOFR futures.

With resting liquidity rivaling that of Eurodollars and Fed Funds, CME SOFR futures adoption accelerated to record levels in the fourth quarter of 2020:

  • Record 1-day volume: 240K contracts (Nov. 19)
  • Record monthly ADV: 86K contracts (Nov. 2020)
  • Record quarterly ADV: 69K contracts (Q4 2020)
  • Record open interest: 708K contracts (Dec. 1)
  • Record large OI holders: 170 holders (Dec. 15)*

CME SOFR products – 2020 year in review:

 

 

2018

2019

2020

FUTURES

Participants

90

350

500+

Avg. daily volume

6,600

36,000

51,000

Peak OI

80,000

578,000

708,000

Avg. daily OI

36,000

365,000

461,000

Peak large OI holders*

69

161

170

Avg. large OI holders*

49

107

141

OPTIONS

Total volume

0

0

9,100

Options on 3M SOFR

0

0

80 expiries

Options on 1M SOFR

0

0

4 expiries

SWAPS

Volume cleared

$200K

$44 billion

$366 billion

Notional outstanding

$200K

$36 billion

$173 billion

Participants

4

27

320+


SONIA futures minimum tick to be reduced January 25, 2021**

Effective for trade date Monday, January 25, 2021 and pending regulatory review, the minimum price increment for Quarterly IMM and MPC SONIA futures contracts will be reduced to 0.0025 for all contract months (previously 0.0025 for front month and 0.005 for all other months).

Ultra 10 celebrates fifth birthday with record year

Introduced in 2016 to provide a futures contract more closely tied to the 10-year point on the UST curve, Ultra 10-Year Note futures have grown into a $100 billion market in just five years.

Ultra 10's record 2020:

  • Record ADV: 255K contracts ($25B notional) per day
  • Record OI: 1.1M contracts ($101B notional)
  • Record large OI holders: 123 holders**

3-Year Note futures top 11K in OI, 100 global participants

With new participants entering the market each month, open positions in 3-Year Note futures reached a record 11,809 contracts ($2.4B notional) on Dec. 31.


Record 2020 for Bond futures as issuance and hedging shift out the curve

With a record $251B in gross 30-year issuance and $171B in new 20-year bonds, the US Treasury began to meaningfully extend its maturity profile in 2020. As a result, hedging activity also shifted to longer-dated contracts.
  • Classic Bond futures (ZB), benefiting from the addition of the 20-year to its delivery basket, saw trading activity outpace all other Treasury contracts on a relative basis. 2020 ADV of 378K contracts was the second highest in its 43-year history, while avg. OI of 1.13M was its highest ever.
  • Ultra Bond futures (UB) ADV topped 200K contracts for the first time in its 11-year history.
  • Aggregate Bond futures (ZB+UB) ADV hit a record 585K contracts, accounting for 15% of Treasury futures ADV (vs. 12% in 2019).
  • ZB+UB accounted for 17.3% of Treasury futures average daily OI in 2020, up from 14.5% in 2019.
  • The Bond vs. Ultra Bond (BOB) curve spread was regularly the most actively traded Inter-Commodity Spread on Globex in 2020 (vs. third most active in 2019).

Data as of December 31, 2020, unless otherwise specified
​​*Source: CFTC Commitments of Traders Report
**Pending regulatory review