December Rates Recap

SOFR futures open interest tops 700K contracts

Led by elevated activity in the 3-Month contract (SR3), open interest in CME SOFR futures hit a record 708K contracts on Dec. 1, representing 42% growth since Oct. 31.

Recent trading highlights:

  • Record single-day volume: 240K contracts (11/19), +57% vs. the previous high of 152K
  • Record ADV: 86K contracts/day in November, +29% vs. the previous high of 66K
  • Record OI: 708K contracts (12/1), +42% vs. 10/31
  • Record large OI holders: 170 holders*
  • SR3 ADV hit a third straight record month, including record ADV in inter-commodity spreads vs. Eurodollars (track SR3-ED basis spreads).
  • Open interest in Reds (second year of SR3) now exceeds 205K contracts, up 6x since August and up 21x since January.

CME Group implementation of SOFR-based fallbacks

CME Group has communicated a detailed plan for implementing improved, strengthened, and standardized SOFR-based fallback procedures for derivatives (Eurodollar futures and options and OTC swaps). ​​​​​

  • Eurodollar futures settle against ICE LIBOR.
  • Upon a trigger event, CME Group plans to follow the fallback approach described in the Nov. 2019 webinar (watch webinar archive).
  • The triggers and fallbacks are expected to be formalized in the coming months through regulatory filings and approvals.

3-Year Treasury Note futures roll to record month

3-Year Treasury futures continue to grow, with new participants, deep roll liquidity, and a fifth consecutive record auction ($56B) driving activity in November.

November 2020 highlights:

  • Record ADV: 6.9K contracts ($1.38B notional)
  • Record single-day volume of 26K contracts traded on Nov. 25
  • Record average daily OI: 7.1K contracts
  • Over 90 global participants spanning a broad mix of banks, asset managers, hedge funds, and PTFs
  • Robust liquidity on outrights and Z0-H1 calendar roll markets
  • Increased cash-futures basis trading via EFPs

Additional information and resources:

A new view on 10-Year Treasury Volatility

Introducing CME Group Volatility Indexes (CVOLTM), a cross-asset family of implied volatility indexes that will be published daily, starting with 10-Year Treasuries and G5 FX.

10-Year CVOL Index at a glance:

  • Derived from options on TY futures
  • Offered in both yield (TYVY) and price (TYVL) volatility formats
  • Methodology suited to “right-tailed” products like rates that can accelerate in either direction
  • Easy replication of an equivalent simple variance options portfolio via equal-weighted option strips
  • Real-time index coming in H2 2021
  • Free historical data available through CME DataMine

Options market updates

Eurodollar market embraces finer strike increments:

  • 6.25 strike price interval added to front Eurodollar and 3-Month SOFR options on Nov. 23 (details).
  • Change has been met with positive client feedback.
  • Over 77K contracts traded in the new strikes in the first week.

2- and 3-Year Mid-Curves seeing increased trading activity:

  • Nov. ADV: 280K contracts, +53% vs. YTD ADV
  • Open interest: 5.5 million contracts, +41% QTD
  • 3EH1 most active (100 DTE)

4-Year Mid-Curves seeing renewed attention:

  • Nov. ADV: 7.9K contracts, +254% vs. YTD ADV
  • Open interest: 209K contracts, +94% QTD

30-Year Bond options outperform rest of the curve

  • Nov. ADV: 163K, +29% vs. YTD ADV
  • OZB accounted for 22% of UST options volume in Nov, vs. 16% YTD

Data as of December 1, 2020, unless otherwise specified
*Source: November 24, 2020 CFTC Commitments of Traders Report