November Rates Recap

SOFR futures CLOB deepens as participation and SR3 usage rise

Driven by an influx of new participants and increased hedging of SOFR expectations further out the term structure, CME SOFR futures liquidity deepened considerably in October.

  • Resting liquidity now rivals that of Eurodollars and Fed Funds, often with thousands of lots offered at the top of the book at the minimum tick.
  • Global participation since launch surpassed 495, up from 470 at the end of September.
  • Open interest topped 500K contracts on Nov. 2, +37% since Oct. 2. 
  • Large holders of open SOFR futures positions climbed to a 2020 high of 154*.
  • ADV increased to 56K contracts per day in October and has jumped to 98K in November. 
  • 3-Month SOFR futures (SR3) saw record ADV for the second consecutive month, with 15% of volume traded via packs and bundles.
  • SR3 open interest has climbed to a record 343K contracts, led by 118% growth in reds (Dec-21, Mar-22, Jun-22, Sep-22) since Sept. 30.

OTC discounting switch drives record participation in CME SOFR swaps

  • $7.2T notional outstanding efficiently transitioned to SOFR discounting and price alignment.
  • Record $98.2B in SOFR swaps cleared in October, growing from $21.6B in September.
  • 320 participants have cleared $327B in SOFR swaps at CME to date.

Rates volumes surge on election uncertainty

  • Total election day volume exceeded 13.4M contracts, +63% vs the YTD average.
  • Over 7.1M contracts traded during overnight hours, nearly 4 times the YTD average. ​​​​​​
  • Eurodollars and 10-Year Treasuries led the way.
  • Classic Bond futures and options garnered significant attention relative to their YTD ADV.

Election day top contracts by volume

Source: CME Group

Key takeaways from Nov. 4 refunding

  • Q4 gross coupon issuance announced at $963B (vs. $864B in Q3)
  • We project Q1 gross coupon issuance at $1,062B
  • With a few dealers noting increased bank demand in the 7- to 10-yr sector, paired with the Treasury's desire to further establish the 20Y, we project auction increases will be largest in 7s, 10s, and 20s.

Gross Coupon Issuance ($B)
White = Projected, Yellow = Announced, Grey = Actual

Source: CME TreasuryWatch tool, 
projections from CME Group Research and Product Development

3-Yr Mid-Curve options positions surge

  • Oct. ADV: 176K contracts, +131% MoM, and the highest since Feb. '18
  • Nov. ADV MTD: 341K contracts
  • OI: 3M contracts, +78% MoM

6.25 strike increment coming to STIR options Nov. 23**

With historically low interest rates driving demand for finer strike increments in STIR options, we are adding a 6.25 strike price interval to front Eurodollar and 3-Month SOFR options effective November 23*.

Read our primer to learn how this change will allow finer hedging in nearby rate movement.

 Learn more

3-Year UST futures surpass 375K contracts traded

Since relaunched on July 13, enhanced 3-Year futures (Z3N) have traded more than 375K contracts.

October highlights:

  • Four new institutional firms began trading the contract.
  • Average top of book depth grew to 236 lots.
  • Bid/ask spreads regularly trade at the new 1/8 MPI.
  • Strongest volume seen on days surrounding 3Y auctions.
  • Yield curve spreading via Globex-listed inter-commodity spreads accounted for 17% of Z3N volume.

 Learn more about Z3N

BrokerTec Quote launches US repo platform

BrokerTec’s dealer-to-client RFQ platform, BrokerTec Quote, launched in the United States, providing a more intuitive and efficient means of trading US repo. 

BrokerTec Quote offers buyside clients robust new technology to empower their existing repo relationships, developed by the market-leading execution venue for fixed income markets.

 Sign up for a demo

Data as of November 6, 2020, unless otherwise specified
*Source: November 3, 2020 CFTC Commitments of Traders Report
**Pending regulatory approval