April Rates Recap

SOFR usage rises across the board

  • SOFR futures ADV topped 62K contracts/day for the second month in a row with record bank and buy-side participation. Open interest hit 612K contracts.
  • Cleared SOFR swaps volume surpassed $59B while open interest grew to $84B (view chart).
  • SOFR options saw multiple days of trading volume even while participants had pressing risk management needs during the month.
  • SOFR debt issuance surged to a monthly record $150B* notional, nearly tripling the previous monthly high (view tenor chart).
  • CME Group published a new presentation outlining details for the SOFR and ESTR Discounting Transition.

More on SOFR

SOFR-ED and SOFR-FF spreads prove useful as basis spreads widen

Drawing on extensive activity in inter-commodity spreads (ICS) vs. Eurodollars and Fed Funds, SOFR futures again proved to be an additive tool for managing exposure to short-term funding markets.

In March, with ICE Libor-OIS and SOFR-EFFR spreads widening to multi-year highs, daily volume in SOFR-based ICS jumped to over 34K contracts per day, representing over $1.35M in DV01 risk transfer per day. (view ICS chart)

SR3-ED spreads, a liquid proxy for trading the ICE Libor-SOFR spread, jumped to 58.5 bps

Trade swap spreads more efficiently

While credit risk exposure has traditionally been captured by spreading swaps vs. cash Treasuries, the rise of Invoice Swap Spreads in recent years gives clients a more efficient alternative for trading swap spreads.

  • Invoice Spreads are packaged trades which typically involve buying (selling) UST futures and paying (receiving) fixed on a related interest rate swap with a similar risk profile. This can either be a vanilla fix/float swap or a SOFR OIS.
  • This spread represents the difference between forward yields on UST futures, and the fixed rate on comparable interest rate swaps.
  • Provides off-balance sheet exposure and precise alignment of dates between futures and swaps.

Trading volume has grown to 165K contracts ($23B notional) per day YTD, +45% vs. 2019 and +246% vs. 5 years ago.

Trading Invoice Spreads:

  • Invoice Spreads are privately negotiated, with the UST futures leg submitted to CME Clearing as an EFR (exchange-for-risk) transaction under Rule 538, and the swap leg processed independently.
  • Modifications to Rule 538 in 2016 enabled packages of multiple invoice spreads to be traded in the same manner (i.e. calendar spreads and tenor switches).
  • Clearing both legs at CME can generate margin savings as high as 81% via portfolio margining – a service that delivered a record $7B in client savings in March.
    • SOFR OIS vs. UST futures are also eligible for portfolio margining
  • View indicative savings for Invoice Spreads >

More on Invoice Swap Spreads

Q1 2020 Rates Volume Recap

ADV (record): 13.8M contracts
Avg. Daily OI: 88M contracts

    Q1 ADV 

Total Rates

 Fut 10.1M
 Opt 3.7M


 Fut 3.6M
 Opt 2.4M


 Fut 5.9M
 Opt 1.3M
Fed Funds  Fut 501K
SOFR  Fut 56K
MAC & Eris Swap  Fut 12K

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CME Group Interest Rates

Data as of March 31, 2020, unless otherwise specified
*Source: Bloomberg