July 2022 Rates Recap

SOFR options capture 46% of Eurodollar options volume

Trading activity in SOFR options skyrocketed in June, with a record number of participants taking advantage of strong liquidity and a market-wide fee waiver (in June and July) to manage short-end rates volatility.

SOFR options performance for June:

  • ADV of 411K contracts (46% of ED options).
  • OI reached 7.2M contracts (25% of ED options).
  • SOFR's share of ED options volume reached a weekly high of 68% (week of June 20), and daily high of 111% (June 24).
  • SOFR futures ADV reached a record 1.98M contracts (118% of ED futures), while OI surpassed 6.37M contracts (67% of ED futures).
  • In aggregate, SOFR futures and options OI now exceeds 13.6M contracts, +636% YTD.

Source: CME Group

Now trading: Reduced-tick ED/SOFR options spreads

  • Trade options premiums at 1/20 of a tick on select permissible two-legged spread strategies (details).
  • Available in open outcry and Globex under the strategy code "LS".
  • Complements "SED" spreads on the futures side to offer clients a cost-effective way to shift ED positions to SOFR ahead of June 2023.

Find SOFR options on Bloomberg

Term SOFR usage grows

  • Loans: $1.56T YTD*
  • Firms under license: 1,230
  • Total licenses issued: 5,250
  • OTC derivatives: $268B**

Futures' efficiencies are coming to the mortgage market on Oct. 3***

On Oct. 3, we're launching physically delivered monthly futures on 30-Year Uniform Mortgage-Backed Securities (UMBS) TBAs, giving mortgage lenders, issuers, and servicers an exchange-traded, centrally cleared, and globally accessible liquidity pool for hedging.

About 30-Year UMBS TBA futures:

  • Contract design adheres to well-established TBA market standards.
  • For each delivery month, futures will be listed for delivery on specified active mortgage coupon rates (e.g. 2.0%, 2.5%, 3%, 3.5%, 4%, 4.5% and 5%).
  • Contract utilizes DTCC/MBSD TBA delivery mechanism to align with existing operations.
  • Block trades in dollar rolls are eligible for 1/16 ticks.

Reminder: Submit feedback on USD LIBOR conversion proposal by July 15

Since publishing our USD LIBOR Conversion Proposal, CME Group has been gathering feedback from participants in hopes of finalizing our methodology by the end of July.

Of the key considerations raised in the proposal, we are hoping to gather additional feedback on these specific items:

  • Handling of basis swaps referencing Fed Funds averaging
  • Decision to split LIBOR vs. LIBOR and LIBOR vs. SOFR basis swaps into pairs of fixed-float swaps
  • Treatment of LIBOR swaps with different fixed and floating payment frequencies​​​​​

Please share any feedback on this proposal by July 15, 2022.

Micro Treasury Yield futures see record monthly active users

In June, a record 1,640 active users enjoyed intuitive, yield-based rates trading – a 10th ​​​​​consecutive month of participation growth.

Q2 2022 saw 3x as many users as Q4 2021, helping to propel open interest to a record 8.3K contracts on June 22.

More on Yield futures

Record trading in Eris Swap futures

  • ADV topped 21K contracts in June, surpassing the previous record of 18.7K set in March.
  • 2-year was the most actively traded tenor at 11.5K contracts/day.​​​​​

More on Eris Swap futures

Insights and analysis

Video roundtable: Pandemic-Era Policy Lessons and The Path Forward for Rates: Watch a panel discussion featuring Cameron Dawson of NewEdge Wealth, Subadra Rajappa of Société Générale, Jim Iuorio of TJM Institutional Services, and Eric Leininger of CME Group.

Event replay: ISDA Benchmark Strategies conference: Couldn't attend in person? Watch the recorded sessions from our June 7 ISDA event in New York, available via complimentary registration.

Research: Eurozone Repo Rates and Volatility: Using RepoFunds Rate (RFR) Indices, we explore how rising rates and collateral scarcity are impacting euro repo markets.

Data as of July 1, 2022, unless otherwise specified

*Source: Refinitiv Deals Screener
**Source: SBSDRView from Clarus
***Pending regulatory review