- 7 Nov 2024
- By CME Group
- Topics: Interest Rates
Portfolio margining between our cleared USD swaps and leading pool of exchange-traded Interest Rate futures and options is helping participants achieve approximately $8B per day in margin offsets. Savings examples under portfolio margining include:
- Invoice spread savings of 80%+
- Convexity bias savings of 98%
To help clients navigate new SEC rules that will require central clearing for U.S. Treasury and Repo transactions, we will launch securities clearing services, pending regulatory review.
Subscribe for updates and access additional details on the new Securities Clearing home page.
A year ago, weekend risk met its match with the launch of Monday-expiring weekly options – a key extension of the Treasury options suite that participants embraced at near-record speed.
With over 10M contracts traded in their first year and average daily volume (ADV) of nearly 50K in Q3, only one Interest Rate product launch in the last two decades had a better inaugural year (Ultra 10-Year futures).
The Treasury options complex overall is also setting records. October was the first month ever that surpassed 1.5M in ADV, underscoring the strong demand for precise risk management in the current environment.
From Oct 4 to Nov 4, the Treasury CVOL Index (TVL) jumped 50 bps to a 12-month high, as markets priced an elevated risk premium into the long end of the curve leading up to the U.S. election. While UST volatility has cooled post-election, current levels remain elevated historically.
With the Fed's latest easing cycle underway, all eyes remain on FedWatch to better understand what the market expects from the central bank.
Traders have also been active in establishing positions in Fed Funds futures, with ADOI setting a new 2024 high in October and eclipsing the 2M contract mark for the second straight month, the first time that has happened since early 2022.
Later this month, we will run the primary conversion of 28D TIIE swaps to F-TIIE. All CME Group-cleared 28D TIIE swaps that mature in 2026 or later will be converted.
Any new in-scope 28D TIIE swaps that are sent into clearing after November 22 will be converted as a part of daily conversion cycles.
Refresh your knowledge of the key details at our MXN Transition Hub, or see the full conversion plan.
In up markets, bond fund managers need to worry about cash drag, while down markets present concerns over selling bonds into an illiquid market.
In both scenarios, Credit futures can help, allowing for close replication of a cash bond position with little upfront capital.
Both SOFR and T-Bill futures generally have exposure periods that are 91 days, but this isn't always the case. Depending on holidays and what day of the week the reference period starts, exposure periods can vary.
Learn more about this nuance for these key STIR contracts and important details for determining exposure periods.
Coming off a record average daily open interest (ADOI) in September, Eris SOFR Swap futures again hit a new record in October with an ADOI of just over 309,000 contracts.
A new one-day open interest (OI) high of 321,294 was also observed on October 22, as more end-users discover the efficiency and practicality of these unique contracts.
Data as of November 1, 2024, unless otherwise specified.
* Pending regulatory approval
View an archive of the Rates Recap online at cmegroup.com/ratesrecap.
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