March Rates Recap

Treasury futures continue to provide market participants with resilient liquidity to manage long-dated interest rate risks in a changing market:

• Book depth remains robust and bid/offer spreads continue to trade at or near the minimum tick despite higher volatility.
• Large OI holders, a proxy for the number of firms holding significant positions, increased 7% YTD to 1,614 in the Feb 18 CFTC COT report.
• Open interest (OI) grew to an all-time high of 16.7M contracts on Feb 19, with outsized growth on the long-end of the curve.
• Average daily volume (ADV) has risen to over 6M contracts this year.
• T-Bond futures (ZB) trading has increased significantly since the US Treasury announced plans to issue 20-year bonds: 
  • ZB OI surged 38% to a record 1.5M contracts on Feb 25.
  • As of Feb 28, ZB accounts for 8.2% of UST futures OI vs. 6.9% a year ago. 
  • ZB ADV accounts for 8.4% of UST futures volume YTD vs. 7.8% in 2019.
• Ultra T-Bond futures (UB) OI grew to an all-time high of 1.3M contracts on Feb 25.
• Fresh off its 4th birthday, Ultra 10-Year futures (TN) surpassed 1M contracts of OI on Feb 25.
• 2-Year futures (ZT) continue to see positive momentum since the successful tick cut in Jan 2019 with OI +14% YoY. 

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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

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