Inflation pressures continued to dominate headlines. Forecasts predict inflation to persist at higher than pre-pandemic levels over the coming months even as some temporary factors fade. In the latest round of policy meetings, major Central Banks maintained rates at their current levels. There is growing consensus that policy tightening will be needed which has seen markets pricing in expectations for accelerated policy normalization in the UK and the Euro-zone.
The current market conditions are providing tail winds for STIR futures and options activity as they are benefiting from the heightened volatility in Fixed Income markets. The cessation of GBP and CHF LIBOR is now weeks away. Volumes remained robust in both established STIR futures and options, while momentum continued to build in risk-free rates (RFRs). SONIA futures and options posted a record month, with combined open interest (OI) in the products now exceeding 6 million contracts. SONIA options are now significantly outperforming short sterling, 60% of market activity was in SONIA over the month with this figure at 98% if contracts with an expiry date before the cessation of LIBOR at the end of 2021 are excluded. SARON futures finished the month with OI of 1,999 with the contracts now enjoying trading on an almost daily basis.
Fixed income finished October with average daily volume (ADV) of 3.0 million contracts, +90% YoY and OI in the complex was 30.7 million contracts, +20% YoY.
ICE Futures Europe LIBOR Transition Fallback Information