August 2023 Rates Recap

Treasury futures absorb record demand as open interest soars

Amid increased net issuance and uncertainty around economic events, demand for reliable, highly liquid interest rate risk management is driving record inflows into Treasury futures.

  • New record: OI has surged 30% since January 1 to a record 18.5M contracts
  • That's 41% YoY: And +64% since post-COVID lows of Nov. 2020.
  • It’s a trend: In the last 3 months, over 90% of days have surpassed the prior February 2020 OI high of 16.7M
  • Record volumes too: Treasury futures notional ADV ($563B) is at a record high percentage of 105% as compared to TRACE cash volumes (52-week rolling basis)

With Friday's non-farm payroll (NFP) approaching, $600 billion in net coupon issuance expected in H2, and two CPI readings before the next Fed meeting, CME Group Treasury futures are primed to facilitate risk transfer.

Source: CME Group


FICC and CME Group to enhance cross-margining program

Increased risk management needs have made capital efficiency more important than ever for market participants. This highlights the importance of the enhanced cross-margining program between DTCC's Fixed Income Clearing Corporation (FICC) and CME Group that was just announced.

  • The program will now include SOFR futures, Ultra 10-Year U.S. Treasury Note futures, and Ultra U.S. Treasury Bond futures
  • The expanded offering will also boost cash and U.S. Treasury cross-margining opportunities

These enhancements will launch in January 2024 for clearing members, pending a regulatory review.


TBA futures OI doubles previous record

Participants are increasingly adopting TBA futures for hedging mortgage risk, leading to records in July.

  • Record monthly ADV: $68 million in notional  
  • Record one-day volume: $227 million in notional (July 19)
  • Record OI: $204 million in notional (July 26)

Regular block activity offers an excellent complement to on-screen Globex liquidity. 


How Eris Swap futures can help leveraged investors

Challenges abound for leveraged investors, particularly given Fed rate hikes. In this environment, Eris Swap futures are an ideal hedging instrument, taking key features of OTC swaps, but with the benefits of a futures structure. Participants have begun to take note of these contracts as evidenced by:

  • YTD ADV over 5,600 contracts
  • OI of nearly 175,000 contracts

Learn the appeal of Eris Swap futures as well as how leveraged investors can put these contracts to work for their strategies.

Data as of August 01, 2023, unless otherwise specified

2-Year options: Already double all of 2022's volume

With more volatility in the short-end of the curve, 2-Year Treasury options have seen a surge in activity this year:

  • Over 20k ADV in H1, up over 10x YoY 
  • OI has doubled YoY, now over 150,000 contracts.  

TIIE-28 is prohibited after Jan 1, 2025. Read the CME Group MXN Swaps Conversion Proposal

Mexico is officially moving from 28D TIIE to TIIE de Fondeo (F-TIIE) in less than 18 months. We are committed to helping facilitate a smooth transition for MXN denominated swaps.

We are looking for feedback on our conversion proposal. Read the full proposal below or reach out to ClearedSwapConversion@CMEGroup.com directly with your questions.


€STR futures: Another OI record as participation broadens

Market participants are increasingly turning to CME €STR futures to manage overnight risk in European money markets

  • €STR futures have seen back-to-back months with ADV over 6,500 contracts
  • OI is now typically over 7.5k

Is the inflation battle over?

Inflation rates have fallen significantly from their highs in the U.S. as core CPI is now just 2.3%.

Erik Norland investigates if the U.S. has already won the battle against inflation.


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