April 2022 Rates Recap

New SOFR transition resources

As the transition from Eurodollars (ED) to SOFR accelerates, we've developed two new resources to help clients better navigate the transition:


SOFR options see record volume and OI as SOFR's share of trading rises to new highs

Volatility in U.S. rates has not slowed down the transition to SOFR. Rather, adoption has accelerated across futures, options, and swaps.

SOFR FUTURES

  • ADV grew to 1.6M contracts in March (62% of ED).
  • OI rose to 4.56M contracts (42% of ED) as of Apr. 5.
  • SOFR's share of ED trading increased for nine consecutive weeks, reaching a weekly high of 69% and a daily high of 80%.

SOFR OPTIONS

  • Volume hit a record 139K contracts on Apr. 5.
  • OI surpassed 1.55M contracts on Apr. 5.
  • Improved liquidity with new market makers entering each week.
  • 70+ participants YTD, including over 50 of the top 100 Eurodollar options firms.

SOFR SWAPS

  • SOFR swaps volume averaged a record $15.6B notional/day in March.
  • SOFR-indexed trades represented 65% of the USD trades cleared at CME, up from 50% in February.

All charts and data sourced from CME Group

View SOFR options OI

Front-end volatility drives record trading in 3-Year T-Note futures

With front-end yields surging and a number of curve pairs inverted, bond traders are increasingly looking to 3Y futures as a liquid source of hedging granularity, relative-value opportunity, and cost-effective execution (1/8 ticks):

  • 290 participants have added 3Y futures to their trading mix, driving ADV to a record 17.5K contracts/day in Q1.
  • With 3s5s inverted, 3Y vs. 5Y (TOF) inter-commodity spreads have seen elevated trading.

Source: CME Group

View 3-Year quotes


20-Year Bond futures - month 1 recap

  • 60+ participants
  • ADV of 700 contracts/day
  • OI reached 2,715 contracts
  • Active futures-cash basis trading with 24% of volume executed via Exchange for Physical (EFP)
  • Improved order book liquidity, now 2 to 3 ticks wide on average, in line with high volatility environment and $275 DV01

View 20-Year quotes


IRS clearing surges in non-mandated LatAm currencies

Ahead of UMR Phase 6, buy-side institutions are increasingly turning to voluntary IRS clearing in non-mandated LatAm currencies.

Deep and established liquidity in CME's cleared swaps markets for Brazilian CDI IRS (BRL), Chilean Cámara IRS (CLP), and Colombian IBR OIS (COP) allow clients to quickly gain margin efficiencies and reduce credit exposure.

  • Avg. daily notional volume has risen 37% to $18.9B, with 20 new clients clearing for the first time in 2022.
  • Avg. daily trade count is up 43% to 531/day.
  • Notional volume in CLP and COP has surged 85% to a $9.5B/day.

More on LatAm IRS clearing


Data as of March 31, 2022, unless otherwise specified (20Y T-Bond data as of March 7)

*Subject to regulatory review