March 2021 Rates Recap

Rates activity surges as bond yields rise sharply

During the final week of February, amidst a sharp rise in bond market volatility (5Y CVOL Index +104% WoW), global participants turned to CME Group's deeply liquid rates markets to manage their interest rate risks.

Futures and options:

  • Rates volume jumped to an 11-month high with over 13.2M contracts traded per day, including the fourth highest single-day volume ever of 32.8M contracts (17M Treasuries, 15M Eurodollars, 266K SOFR, 253K Fed Funds) on Feb. 25.
  • Numerous products saw single-day volume records, including Ultra 10Y futures, T-Bond futures, 3Y futures, SOFR futures, Treasury options, and 3Y Mid-Curve options.
  • CLOB liquidity proved highly resilient with significant size at the top of the book and bid/offer spreads trading at or near the minimum tick.
  • OI +36% YTD to 67M contracts, led by 42% growth in Eurodollars and new highs in Ultra 10Y futures, SOFR futures, and 3Y Mid-Curve options.
  • Large OI holders +11% YTD to 2,080 holders*.

Cash market:

  • A testament to the success of the recent migration to CME Globex, US Treasury Actives on BrokerTec saw the ninth largest volume day ever on Feb. 25, including a new high for 7Y volumes.
  • EU Repo saw record monthly ADV of €291B in February (previous high of €287B in Mar '19), followed by a one-day volume record of €339B on Mar. 1.

Cleared swaps:

  • SOFR swap volume rose to $50B in February, the third highest month on record.

SOFR futures top $237B per day as liquidity deepens in third-year greens

With 3-Month (SR3) liquidity deepening significantly in third-year (green) contract months, CME SOFR futures tallied new highs for volume, open interest, and large participants in February:

  • Record ADV: 123K contracts ($237B in representative notional**), +83% YoY
  • Record one-day volume: 266K contracts ($378B)
  • Record OI: 762K contracts ($1.8T), +41% YoY
  • Record large OI holders: 192 holders*, +34% YoY

SR3 stats – Feb '21 vs. Jan '21

Record month for 3-Year Note futures

Eight months since launch, enhanced 3-Year Treasury futures continue to see increased adoption.

Updates on IBOR fallbacks

Recent exchange notices:

Updated document: IBOR fallbacks and conversion considerations for cleared swaps

CME Group is actively engaging market participants on a potential conversion methodology that addresses the operational and risk management concerns associated with implementing ISDA fallbacks while mitigating any potential disruptions.

Following a series of bilateral conversations with a broad range of market participants, we propose participants consider three alternative options for CME cleared OTC IRS. These options are outlined in a new IBOR fallbacks and conversions considerations discussion document.

If you have any questions or wish to offer feedback on the alternative options, please contact your CME Group sales representative.

Discounting transition for emerging market IRS and OTC FX products

  • Timing: close of business on March 26, 2021, subject to regulatory approval.
  • Scope: Mexican TIIE IRS, our six non-deliverable IRS currencies, and USD- or EUR-settled OTC FX pairs.
  • Process: CME Group will conduct a cash adjustment for this transition to compensate for the change in NPV for each swap under SOFR discounting. For avoidance of doubt, CME Group will be forgoing a re-hedging exercise and auction for this transition.​​​​

New (unofficial) 3:00 p.m. CT fixings

In response to index valuation time changes being adopted in isolated areas of the fixed income index space, CME Group is now publishing unofficial fixings for Treasury futures and MAC Swap futures products as of 3:00 p.m. CT (4:00 p.m. ET).
  • CME Group is not making any changes to current official daily settlement prices, times, or any variation margin calculation processes.
  • Fixing prices are available over the CME Data Insights Settlement and Valuation channels, and on our web site here.

An expanded view of UST volatility

To provide a more complete view of volatility expectations across the Treasury curve, and expanding upon the previously launched 10-Year CVOL Index, we've begun publishing CVOL Indexes on 5-Year T-Note and Classic T-Bond futures.

Data as of February 26, 2021, unless otherwise specified
​​*Source: February 16, 2021 CFTC Commitments of Traders Report
**Notional shown for illustrative purposes only, computed based on the value of an equivalent money market instrument with the same dollar-value-of-basis point (DV01).