ICE Interest
Rates Report

October 2021 Highlights

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

  • Long Gilt futures are the highly liquid market benchmark for the intermediate term U.K. government bond yield curve
  • ADV in October was 317,400 contracts which marks a 38% increase YoY. This set a new record for highest ADV in a non-roll month
  • OI continued to grow over the period. At the end of October it stood at 937,00 contracts, an increase of 80% on the same period last year and the highest ever posted in a non-roll month
  • UK sovereign curve is playing an increasingly important role, providing a means for market participants to manage risk within the context of changes to long-term inflationary expectations and reductions in government purchases of sovereign debt
  • 38% of GBP-denominated STIR futures activity was in 3-month SONIA Index futures over the month
  • OI in the complex set a new OI record almost every day. It finished the month at over 1 million contracts for the first time. SONIA futures OI continued to grow and now represents 34% of market 3M GBP futures OI
  • Market Participants are actively making use of the asset allocation facility and inter-contract spreads, allowing for the executing of SONIA and LIBOR basis trades as a single transaction
  • SONIA options enjoyed their best month to date, significantly outperforming short sterling options in volume over the period
  • At 4.9 million contracts, 56% of market GBP-denominated options OI is now in SONIA. For options with an expiry date in 2022 and beyond, the figure is significantly higher at 93%
  • ICE was home to 15% of all SOFR futures activity adjusted for notional
  • Inter-contract spreads for 3-month SOFR and Eurodollar futures are available in the central limit order book
  • SOFR futures minimum price fluctuation is 0.0025 or $25 throughout the strips
  • The contracts trade alongside the full suite of ICE's fixed income and RFR futures and options and offer a margin efficient way to manage exposure in the short-term end of the USD curve

***All STIR Futures are now Rate Index futures. Notional values in this document are for illustrative purposes only. They use the historical interpretation of notional, the unit of trading represented based on a notional deposit
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