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