September Rates Recap

Get ready for the October 16 OTC switch to SOFR discounting

As the transition to SOFR discounting approaches, here's a full library of resources we've created to help market participants smoothly navigate this process.

In August, a record 28 firms (7 new) cleared $22.4B in SOFR swaps, the third highest monthly volume since launch. Notional outstanding now exceeds $117B (chart).

Contact our OTC team with any questions

Fed Funds futures curve extending to five years; initial listing of 1-yr strips

In response to client demand, CME Group will implement the following enhancements to Fed Funds futures effective September 21*:

  • Listings will be extended from 36 consecutive calendar months (three years) to 60 consecutive months (five years).
  • The pricing mechanism on strips will be amended from net-change pricing (i.e., reset at 0 every day) to an average price of legs.
  • Three more 12-month strips will be listed as an efficient mechanism for replicating OIS, with liquidity available in the front two 1-year strips (nearest 12 full months and subsequent 12 months).

View SER-8630 for details

6.25 strike price interval coming to Eurodollar and 3-Month SOFR options

Effective September 14*:

  • A 6.25 basis point strike price interval will be added within the current range of 150 basis points to the four serial and two nearest quarterly expiries for Eurodollar and 3-Month SOFR options.
  • Initial expirations will be Oct 2020, Nov 2020, Dec 2020, Jan 2021, Feb 2021, and Mar 2021.
  • Mid-Curves will remain unchanged.

View SER-8638 for details

Eurodollar options coming to portfolio margining by end of 2020*

Indicative margin calculations suggest clients may be able to realize up to 83% in initial margin savings with this enhancement.

Client and clearing member testing begins October 28.

Learn more

RV trading and deepening participant pool spur strong volume in 3-Year UST futures

In the first full month of trading:

  • ADV +42% MoM to nearly 6K contracts per day, including a record 13.4K contracts traded at month-end.
  • Open interest +43% MoM to nearly 7K contracts.
  • Participation expanded to 65+ global participants.
  • Relative value trading via Globex-listed curve spreads accounted for 15% of trading volume in Aug.
  • 3Y vs. 5Y (TOF) and 2Y vs. 3Y (TYT) curve spreads account for the majority of activity, but 3Y vs. 10Y (TUN) and 3Y vs. Ultra 10Y (TYX) spreads have seen growing activity in recent weeks.
  • Avg. book depth grew to 222 lots at the top of book, +18% MoM.
  • Bid/ask spreads increasingly trade at the new 1/8 MPI.

More on 3s

Hedging 3-Yr Issuance

SOFR futures volume highest since March; Packs and Bundles liquidity arrives

CME SOFR futures traded over 42K contracts per day in August, +24% MoM, and the highest level since March:

  • Streaming quotes enabled over 4.4K contracts per day in SOFR Packs & Bundles, helping to increase trading activity further out the curve.
  • Open interest saw notable growth in deferred contract months:
    • SR1U0 +39%
    • SR3Z0 +38%
    • Contracts in 2021 and beyond +16%
  • Large open interest holders in 3-Month SOFR futures hit a new high of 67**.

SOFR futures volume chart

FRN issuance tracker

Data as of August 31, 2020, unless otherwise specified
*Pending regulatory approval
**Source: August 25, 2020 CFTC Commitments of Traders Report