Treasury futures continue to provide market participants with resilient liquidity to manage long-dated interest rate risks in a changing market:
Underpinned by strong growth in weeklies (Fri +46%, Wed +108% YoY), expanded participation during non-US hours (+104% YoY), and actionable liquidity spanning three venues (CME Globex, Pit, Blocks), Treasury options have become one of the world's deepest pools of non-linear rates liquidity. This year, average daily volume exceeds 1.34M contracts, +48% YoY.
With the majority of swaptions uncleared, Treasury options can provide significant margin, capital, and operational efficiencies to clients impacted by the expanding Uncleared Margin Rules (UMR) in September of 2020 and 2021, with inclusion based on gross notional thresholds of $50B and $8B, respectively
In February, drawing on expanded participation and robust basis trading vs. Fed Funds and Eurodollars, SOFR futures volume jumped to a record 67K contracts/day.
Participation broadened to 400+ global participants.
Inter-commodity spreads vs. FF and ED accounted for 31% of SOFR volume.
Aggregate OI grew 35% to 540K contracts with notable growth further out the curve.
1-Month SOFR (SR1) OI expanded out to 12 months (up from nine months in Jan 2020) with outsized growth in deferred months:
3-Month SOFR (SR3) OI also saw outsized growth out the curve:
In February, 16 participants cleared over $32B in SOFR swaps at CME, with open interest growing to $52B.
Data as of February 28, 2020, unless otherwise specified.
* Source: Bloomberg