May 2021 Rates Recap

CME Term SOFR launch met with strong client interest

Available in 1-month, 3-month, and 6-month tenors, CME Term SOFR Reference Rates are BMR and IOSCO compliant, aligned to the ARRC's key principles, and ready to use in cash market products.

CME Term SOFR benchmarks are anchored by average daily volume of $232B* notional from SOFR futures, with average volumes supporting each tenor as follows: 1-month ~$75B, 3-month ~$125B, 6-month ~$160B.

On a DV01 basis, CME Term SOFR benchmarks are based on $3.3 million in daily DV01 risk-adjusted volume, 13x the daily DV01 risk transferred in the overnight repo market (read our full DV01 analysis here).

Licensing information:

  • Available today for licensing, with use limited to cash market transactions initially until June 30, 2023
  • Any expansion in use cases beyond cash markets after this initial period will be communicated to the market accordingly
  • Licensing for cash market products will be available at no cost through December 2026
  • Thereafter, CME will assess any need to impose reasonable fees so as to offset any direct costs associated with the continued oversight and administration of Term SOFR Reference Rates

SOFR futures underpinning CME Term SOFR see record open interest and participation

At just shy of three years old, CME SOFR futures continue to reflect a liquidity pool of a much more mature product.

  • Bolstered by a record 206 large open interest holders**, SOFR futures open interest climbed 16% in April to a new all-time high of 802K contracts 
  • Open interest now extends out four years to June 2025
  • Average daily volume topped 100K for a third consecutive month with 112K contracts traded per day in April, +295% YoY 

Managing Behemoth Treasury Issuance

As exploding US debt collides with other macro crosscurrents to create large uncertainty with respect to inflation, unemployment, and GDP, total cost-minded investors are turning to CME Group's liquidity pools and tools to manage elevated risks. 

  • Treasury futures volume surged to 5.2M contracts/day in Q1, the second highest quarterly ADV ever 
  • Open interest has climbed 18% YTD to 13.8M contracts, with outsized growth in the belly of the curve – TN OI +50%, ZN OI +30%
  • Treasury options are averaging over 1 million contracts/day
  • Navigate record issuance with innovative tools for Treasury auctions and Fed's balance sheet within the CME TreasuryWatch tool

Read our latest note exploring the impact of the current debt regime and the tools available for efficiently managing associated risks.

Coming May 24: Mexican Funding TIIE (F-TIIE) futures

The Trillion Dollar Helicopter

On May 24***, CME Group will launch peso-denominated, monthly futures contracts based on the Central Bank of Mexico’s O/N TIIE Funding Rate (F-TIIE) – an IOSCO compliant RFR based on the highly developed and liquid Mexican repo market.

Complementing CME’s leading cleared OTC Mexican TIIE IRS market, F-TIIE futures will trade alongside CME SOFR futures and MXN/USD FX futures to offer a comprehensive hedging solution for the short-end of the Mexican curve.

Data as of April 30, 2021, unless otherwise specified
*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).
​​**Source: April 27, 2021 CFTC Commitments of Traders Report
***Pending regulatory review