- 10 Jan 2022
- By CME Group
- Topics: Interest Rates
Anchored by a deliverable basket of original issue 20-year Treasury bonds with remaining term to maturity at delivery between 19 years 2 months and 20 years, 20-Year T-Bond futures will offer greater efficiency and precision in managing 20-year bond exposures.
Contract features include:
- A full suite of inter-commodity spreads vs. established tenors to offer new curve trading opportunities and assist with liquidity development.
- The ability to trade the 20Y futures-cash basis or hedge neighboring swap exposures at the 20-year term to maturity with Invoice Swap Spreads.
- Automatic margin offsets vs. existing interest rate products, and eligibility to add portfolio margining with CME-cleared IRS later in 2022.
Capping off a year of meaningful expansion, the SOFR market accelerated to new records in Q4 2021:
- SOFR futures ADV jumped to 277K contracts per day in Q4 '21, more than doubling Q3 volumes.
- SOFR futures open interest rose 83% in Q4, closing the year at 1.85M contracts.
- With a record $219B cleared in December, CME SOFR swaps volume topped $429B in Q4, more than doubling volume from the first three quarters of 2021 combined.
CME SOFR products – 2021 year in review:
|
|
2018 |
2019 |
2020 |
2021 |
|---|---|---|---|---|---|
FUTURES |
Participants |
90 |
350 |
500 |
750 |
ADV (Q4) |
11K |
42K |
69K |
277K |
|
Peak OI |
80K |
578K |
708K |
1.85M |
|
Peak large OI holders |
69 |
161 |
170 |
249** |
|
OPTIONS |
Total volume |
N/A |
N/A |
9,100 |
9,000 |
Peak OI |
N/A |
N/A |
8,100 |
8,570 |
|
SWAPS |
Volume cleared |
$200K |
$43B |
$322B |
$813B |
Notional outstanding |
$200K |
$36B |
$173B |
$535B |
|
TERM SOFR |
Firms under license |
N/A |
N/A |
N/A |
450 |
Total licenses issued |
N/A |
N/A |
N/A |
2,000 |
Source: CME Group
Tradable in 0.1 bp increments around the ISDA fallback spread for 3M USD Libor, reduced-tick SR3-ED spreads aim to further reduce friction for participants moving positions from Eurodollars into SOFR futures.
With SOFR futures liquidity firmly established, the spotlight for 2022 now turns to SOFR options, which are designed to replicate the entire Eurodollar options product suite.
- SOFR options are already garnering more attention with 7,200+ lots trading in the year's first week.
- Liquidity is available on screen, via the trading floor, and a growing list of block/RFQ liquidity providers.
U.S. Treasury futures volume averaged an all-time record 4.5M contracts ($497B notional) per day in 2021, including individual product records in five of the seven tenors.
2021 contract ADV by tenor:
- 2Y: 458,110
- 3Y: 10,644 (record)
- 5Y: 1,118,356
- 10Y: 1,861,028 (record)
- Ultra 10Y: 372,187 (record)
- T-Bond: 450,070 (record)
- Ultra T-Bond: 229,206 (record)
Historically, U.S. Treasury 10-year yields have tended to embed a risk premium for future inflation. That risk premium was erased by QE and low rates in the 2010-2021 period. Will it reemerge once QE has ended and short-term rates are rising?
Chief Economist Blu Putnam explores this and other key questions facing Treasury yields in 2022.
- BSBY futures open interest has grown to over 16K contracts, and BSBY swaps have seen multiple trades cleared.
- Micro Treasury Yield futures have seen over 1,500 unique accounts trade nearly 900K contracts since launch.
- The Treasury TAS order book remains well populated with significant size offered across all tenors.
- With expectations that the F-TIIE rate will become an increasingly important benchmark for Mexico in 2022, F-TIIE futures continue to see strong interest and sporadic trading.
Commencing in 2022, CME Group Exchanges will observe the Juneteenth holiday each year. As a result, the last trading date and settlement procedures for certain CME and CBOT Interest Rate futures will be impacted.
Data as of December 31, 2021, unless otherwise specified
*Subject to regulatory review
**Source: December 28, 2021 CFTC Commitments of Traders Report
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