July 2023 Rates Recap

€STR adoption accelerates

€STR futures are gaining critical mass as strong liquidity continues to attract new users and larger order flow.

  • Closed June with record weekly ADV of 14K contracts, including a one-day high of 23K on June 30.  
  • Open interest (OI) more than doubled month-over-month, closing June at 7.6K contracts. 
  • Bid-ask spreads in the front four contracts (Whites) are now quoted at an average width of one-half of a basis point (0.50bp), 40% tighter than widths observed in May. 
  • Top-of-book quantity increased by 400%. 

Ready to take part in this fast-growing market? The  "€STR First" market-wide fee waiver has been extended through September. 

€STR need-to-know links

Figure 1: CME €STR futures

Source: CME Group

No summer lull for TBA futures activity

TBA futures also notched record activity in June, with ADV rising to 434 contracts, +23 vs. May's record.

Figure 2: TBA futures ADV by coupon

Source: CME Group

Learn more about TBAs

Flight to liquidity drives record inflows into Treasury futures

Marking one of the fastest post-roll OI builds in history, Treasury futures OI jumped to a record 18M+ contracts, underscoring the deep and resilient liquidity that participants rely on.

Other notable trends and highlights

  • OI has grown by 3.8M contracts in 2023, +27% YTD
  • The Two-Year Note is the leading contributor having added 1.5M contracts, +67% YTD
  • Asset managers' long positions are at or near all-time highs across the curve
  • Leveraged funds' short positions are at or near all-time highs in 2Y, 5Y, 10Y, and Ultra 10Y
Figure 3: Treasury futures OI Chg (2023 YTD)

Source: CME Group, as of July 5, 2023

Path clear for LatAm swap growth

Strong uptake in June pushed CME Group cleared LatAm swaps to a record pace (annual basis) for 2023. Participants continue to favor clearing non-mandated swap currencies, such as CLP and COP, in order to achieve capital efficiencies offered by CME Group.  

Figure 4: CME cleared interest rate swaps in LatAm currencies

Source: CME Group

Stay tuned for more updates on the LatAm complex as the Mexico market begins its transition from 28-Day TIIE to TIIE de Fundeo (F-TIIE)

Data as of June 30, 2023, unless otherwise specified
*Source: Bloomberg

TBA futures and mortgage analytics

Our new Mortgage Analytics tool can provide insight into the TBA futures and broader MBS markets, but are you getting the most out of it? See our new user guide for more information on how to use the tool. In particular learn how to read the price history tab and how to utilize the MBS Run-Off view to see how various amounts could impact MBS market levels in the future. 

CME FedWatch Tool: Key barometer of FOMC activity

For traders looking to get a read on the next move from the Fed, the CME FedWatch Tool has become a top indicator. The FedWatch Tool is based on Fed Funds futures prices, giving participants an easy-to-understand gauge of what the market is pricing in for upcoming Fed activity. Discover more about the ins and outs of the tool and how actual market participants are using FedWatch in their own decision-making processes. 

Hedging Mexico's BONDES

BONDES are an important part of Mexico's funding ecosystem, coming in at over one-fifth of Mexico's peso-denominated sovereign debt market. For those looking to hedge these floating rate notes, CME F-TIIE futures provide an excellent hedge, particularly given that BONDES' coupons are based on Banxico's F-TIIIE rate. 

Updated performance bond requirements

As per the normal review of the market volatility to ensure adequate collateral coverage, the Chicago Mercantile Exchange Inc., Clearing House Risk Management staff approved the performance bond requirements for the following interest rate products listed below. Please email questions to Clearing.RiskManagement@CMEgroup.com.

View an archive of the Rates Recap online at cmegroup.com/ratesrecap.