ICE Interest
Rates Report

September 2021 Highlights

The global reopening of national economies continued with most developed countries further lifting the restrictions imposed due to the Covid-19 pandemic. The recent spread of the Delta variant poses a risk to the global outlook. While the Delta variant is creating uncertainty and slowing the momentum that markets enjoyed over the summer months, it is unlikely to fundamentally derail recovery. While forecasts predict inflation to retreat to pre-pandemic levels over the coming months as temporary factors fade, markets are now pricing in expectations for accelerated policy normalization in the UK and the Euro-zone.

The current market conditions are providing tailwinds for STIRs as they are benefiting from the heightened volatility in Fixed Income markets. With the date for LIBOR cessation edging closer, volumes were robust both in established STIR futures and options, as well as rapidly gaining momentum in RFRs. SONIA futures and options posted another record month, with combined open interest (OI) in the products now exceeding 4 million contracts. SONIA options outperformed Short Sterling, 69% of market activity was in SONIA over the month with this figure at 97% if contracts with an expiry date before the cessation of LIBOR at the end of 2021 are excluded.

Fixed Income finished September with average daily volume (ADV) of 2.2 million contracts, +4% YoY and OI in the complex was 27.3 million contracts, +13% 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 September was 274,600 contracts which marks a 30% increase YoY
  • OI at the end of September stood at 805,000 contracts, an increase of 46% on the same period last year. This is the highest month-end OI in close to 3 years
  • UK Sovereign curve is paying an increasingly important role, providing a means for market participants to manage risk within the context of benchmark reform
  • 30% of GBP-denominated STIR futures activity was in 3M SONIA Index futures over the month
  • OI in the complex set a new record almost every day. SONIA futures OI now represents 26% 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, outperforming Short Sterling options in volume over the period
  • At 3.2 million contracts, 44% 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 88%
  • Against a backdrop of revised Bank of England (BoE) forecasts, 1M SONIA futures posted their best month activity since January 2020, with ADV reaching 2,700 contracts
  • ICE was home to 25% of all SOFR futures activity adjusted for notional
  • Inter-contract spreads for -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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