May 2022 Rates Recap

Announcing SOFR First for Options

Based on client feedback and validation, CME Group will launch 'SOFR First for Options', a market-wide initiative geared toward accelerating adoption and liquidity in SOFR options during the months of June and July.

  • Exchange trading fees for SOFR options will be waived June 1 through July 31, 2022 (rule filing)*.
    • This will include holidays on transaction fees, block fees, give-up fees and pit broker fees.
    • This will automatically be represented in 
      CME fee systems.
    • Participants should confirm with their Clearing Member to ensure realization of this benefit.
  • The exchange will invest in deepening the provision of liquidity to meet growing end-user demand to trade SOFR options.
  • We will sunset new Mid-Curve and Quarterly Eurodollar options contract listings (SER)*.
    • Beginning with the Sep-2023 Mid-Curves and Jun-2026 quarterly contracts, all new Mid-Curve and quarterly contract listings will be exclusively SOFR.
    • Serial ED options will continue to be listed.
    • No delistings of previously listed ED options will be made.

SOFR options accelerate as SOFR futures overtake Eurodollars for the first time

SOFR OPTIONS

  • April ADV was a record 75K contracts/day, including a daily high of 222K.
  • ADV jumped to 152K contracts in the first four days of May, including a daily high of 233K.
  • OI surpassed 2.3M contracts as of May 5, up from just 2.6K contracts at the start of the year.
  • Liquidity continues to deepen with new market makers entering each week.

Source: CME Group, May data as of May 5

SOFR FUTURES

  • SOFR's share of Eurodollar trading reached a monthly high of 80% in April, including a weekly high of 92%, and a daily high of 103%.
  • SOFR's share of Eurodollars rose to 95% in the first four days of May.
  • Packs and Bundles ADV reached a record 305K contracts/day (23% of SR3 volume).
  • OI surpassed 5.2 contracts as of May 5, or 50% of Eurodollars

 

Source: CME Group, May data as of May 5

CME Term SOFR loan market surpasses $1 trillion

CME Term SOFR continues to see a groundswell of activity across global, regional, and trade finance banks, private lenders, insurance firms, asset managers, and hedge funds.

  • Firms under license: 960+
  • Total licenses issued: 4,300+
  • Loans tied to Term SOFR: $1.1 trillion (Source: Refinitiv Dealer Screener)

Our resources, including use cases, methodology, fee information, and FAQs, can be accessed here.


Modifications to 20Y delivery basket*

To better position the 20-Year Bond futures contract for success across a variety of interest rate environments and bond issuance scenarios, the following modifications have been implemented beginning with the September 2022 contract:
  • Maximum remaining term to maturity has been trimmed to 19 years 11 months (from 20 years currently).
  • Aging original issue 30-year bonds whose remaining term to maturity falls within the basket range are now eligible for the delivery basket.​​​​​

View SER


Treasury yields are on the rise, as are volumes in Micro Treasury Yield futures

A record number of active individual traders are adding Yield futures to their trading mix as rising yields, persistent inflation, and an increasingly hawkish Fed outlook have rates markets top of mind for investors.

Source: CME Group

More on Yield futures


Trading yield moves with 10-Year T-Note options

Will volatility and higher yields persist, or will macroeconomic conditions help to stabilize long-term yields? Veteran institutional trader Rich Excell examines TY options strategies for either view.


Economic insights

Assessing Monetary Policy Through The Taylor Rule: The Fed may no longer follow the Taylor Rule as it once had, but the rule may still be used to assess pressure on the Fed to raise rates. Chief Economist, Blu Putnam explores.​


Data as of April 29, 2022, unless otherwise specified

*Pending regulatory review.