SOFR Swap Nuances

This week, we take a look at the world of SOFR swaps and some of the intricacies associated with trading these OIS products. Nuance 1: Reset Lag and Payment Lag (courtesy of the Clarus blog) Overnight Index Swaps have a peculiarity concerning the fixing date (or publication date) of the underlying overnight rates. The fixing […]

RFR Data: Where is the €STR risk?

The ISDA-Clarus RFR Adoption Indicator has been published for August 2020. The headlines are: The RFR Adoption Indicator was at 6.4% in August 2020. This was pretty unchanged from 6.8% the prior month, and short of the highs hit in January 2020. 3.6% of all USD risk was traded in SOFR vs 3.8% last month, so no great change there. […]

40% of the GBP Market Trades Versus SONIA

The ISDA-Clarus RFR Adoption Indicator includes currency specific measures on how much RFR risk is trading. These values are available as interactive charts on rfr.clarusft.com. Notable adoption of RFRs has occurred in both GBP markets (40%) and CHF (8%). We look at each of the six currencies covered by the indicator in this blog. Data […]

Valuation challenges for non-cleared derivatives

The past few months I have been looking closely at the potential for valuations challenges over the last months and days of LIBOR with a potential cliff and wall as we approach December 2021. The rather benign pricing in the market predicts a very gradual ‘glide’ into the end but this may not actually be […]

Calculate your own RFR Adoption Indicators

The ISDA-Clarus RFR Adoption Indicator provides a set of monthly metrics that firms can use to monitor the progress of RFR trading in IRD markets, both ETD and OTC. In this article, I explain why firms should also calculate RFR Adoption Indicators for their own trading. Background For those of you not yet familiar, below […]

RFR Data: SOFR Sees Record Risk Traded

The ISDA-Clarus RFR Adoption Indicator has been published for July 2020. The headlines are: The RFR Adoption Indicator was at 6.8% in July 2020. This moved higher from 4.7% the prior month, reaching the highest level since February. Of particular note, 3.8% of all USD risk was traded in SOFR. This was higher than the […]

ISDA-Clarus RFR Adoption Indicator

The ISDA-Clarus RFR Adoption Indicator was at 4.7% in June 2020. This indicator measures the risk-weighted (DV01) percentage of trading activity that takes place in RFR products. Five further sub-indicators have been developed in conjunction with ISDA, providing market participants with granular transparency into RFR activity. Check out the first publication to learn about RFR […]

Managing IBOR Transition – Fallback Spreads

Last month I wrote about the potential for a very non-linear transition when LIBOR is discontinued. This was also covered in a recent Risk article: ‘Beware the cliff edge in Libor fallbacks’. The impending announcement on the timing of LIBOR cessation process was covered by Chris Barnes earlier this month, Also with the potential for […]

SONIA Q2 2020 Update

43% of GBP risk transacted in Q2 2020 was in SONIA. And only 24% of GBP notional was in LIBOR. Now that volatility has died down somewhat there is less short-dated trading activity. Can we consider the market standard as SONIA yet? The first Monday in March 2020 will likely be remembered for many reasons. […]