The level of uncertainty around the outlook for the global economy remains highly elevated. As the challenging macroeconomic environment continues to play out globally, risk-off sentiment has firmly set in.
Central Banks around the world continued on the trajectory of rapid rate hikes in an attempt to combat ever-persistent inflation. Policy makers are facing tough decisions and a fine balancing act; while they have made it clear that their principal concern is the strongest run of inflation since the 1980s, higher rates are putting pressure on already fragile economies and increasing the risk of recession.
Given the synchronized monetary policy cycles in the UK and the Eurozone and accelerated rate increases, volumes in the Fixed Income complex were solid in September. Markets continued to see heightened volatility which was supportive of performance in STIR futures and options.
Following the initial UK mini-budget announcement on Sept. 23, SONIA futures saw an all-time record trading day with 826,631 lots. SONIA futures also enjoyed the highest monthly Average Daily Volume (ADV) since their launch of 406,000 lots, which is approximately three times the levels observed a year ago.
Momentum in the Euribor complex continued with YTD 2022 ADV in Euribor futures at an all-time high of 1.15 million contracts. September ADV in futures was 1.49 million, +118% YoY and 423,500 in options, almost four times the level seen over the same period last year. Open Interest (OI) in Euribor remains robust. The complex finished September with OI of 4.40 million futures and 13.83 million options, +5% and +145% YoY respectively. Combined OI in the Euribor complex is now trending at levels last seen almost 10 years ago.
SARON futures posted a strong performance in September as the contracts are being established as the benchmark for CHF listed rates. ADV was at a record 17,600 lots while OI stood at 160,700 at the end of the period.
Fixed Income finished September with ADV of 2.66 million contracts, +45% YoY. OI in the complex was 21.98 million contracts, +4% YoY.
ICE Sees Early Industry Support for New U.S. Residential Mortgage Futures
Two of the biggest names in U.S. residential mortgage markets - R.J. O’Brien & Associates and Pennymac - are getting behind ICE’s new mortgage futures contracts. Their support is an important early step in the adoption of ICE’s first futures contracts for U.S. residential mortgages – the U.S. Conforming and Jumbo 30-year Fixed Mortgage Rate Lock Index futures.