February 2022 Rates Recap

SOFR options gaining critical mass, open interest tops 500,000

With SOFR futures now among the most liquid STIR markets in the world, SOFR options are capturing the attention of major buy- and sell-side firms.

Performance for week ending Feb. 4:

  • ADV of 67K contracts with a daily high of 118K.
  • OI has jumped to over 500K contracts.
  • 35+ institutional participants have started trading SOFR options in 2022.
  • Liquidity is improving daily across all execution venues (floor, Globex, and bilateral blocks).
  • A growing list of liquidity providers are standing by to respond to RFQs.
  • 19% of the 1.5M ADV in Eurodollar options is SOFR-linked through the fallback spread now fixed at 26.161 bps, and employed in the CME fallback approach (SER).

SOFR futures see exponential growth

Building on a record January that saw ADV spike to 730K contracts and OI surge to over 3M contracts, SOFR futures continue to see a groundswell of activity as new users switch to SOFR for the first time and existing users trade in greater size.

Over the last two weeks:

  • ADV of 964K contracts (31% of Eurodollars) with a daily high of 1.3M.
  • Packs and bundles ADV of 120K contracts with a daily high of 172K.
  • Large OI holders in SOFR futures reached a record 345, having grown 39% YTD**.
  • Reduced-tick SR3-ED spreads (SED), tradable in 0.1 bp increments around the ISDA fallback spread for 3M USD Libor, have seen steady growth in order book liquidity and volumes.
  • Traditional SR3-ED inter-commodity spreads remain highly active for managing Libor transition basis risks with ADV exceeding 132K contracts.

More on SOFR

SOFR swaps trade count rises 40%

  • CME Cleared SOFR swaps volume reached $185B notional ($9.28B/day) in January, with OI growing to $662B.
  • SOFR set a new record of 281 trades per day in January, +40% vs. the previous record of 201 set in December.
  • SOFR-indexed trades represented 37% of the USD trades cleared at CME, up from 35% in December.

More on SOFR swaps

Trading at Settlement (TAS) fee reduction for non-members

On February 1, the non-member fees for Treasury TAS transactions were reduced to align with the current CME Globex fees for each product.

TAS activity has increased in recent weeks with over 5,000 contracts traded and several markets that are bid or offered at TAS flat (0).

View SER-8901 for details

20-Year T-Bond futures now available for testing in New Release

Launch date: March 7*

Deliverable basket: Four most recently issued 20Y bonds with remaining term to maturity between 19 years 2 months and 20 years.

Globex code: TWE

Bloomberg code: TWE

Contract specs

Video: Product overview

Micro Treasury Yield futures surpass 1 million contracts traded since launch

Cash-settled to BrokerTec UST benchmarks, Yield futures offer direct exposure to OTR Treasury securities at four key tenor points on the curve​​​​​, enabling traders to more precisely hedge Treasury auctions.

Trade the When Issued (WI) Security a Month in Advance

Treasury futures see record large OI holders**

The number of large position holders in Treasury futures hit a new high of 1,649 in January.

This represents a 16% increase YoY, with outsized growth in 2Y, 5Y, and Ultra 10Y futures which have risen 33%, 24%, and 23%, respectively.

Aggregate LOIH in interest rate futures also reached a new high of 2,372 as of Feb. 1, +17% YoY.

Commitments of Traders tool

CME FedWatch enhanced with additional meeting dates

The CME FedWatch tool now offers rate move probabilities extending out to the July 2023 FOMC meeting, using projected dates for the yet-to-be-announced March, May, June, and July 2023 FOMC meetings.

FedWatch currently shows Fed Funds futures markets are pricing a 97% probability of four 25 bps hikes in 2022, and an 83% probability of five.

View latest hike expectations

Data as of February 4, 2022, unless otherwise specified
*Subject to regulatory review
**Source: CFTC Commitments of Traders Report