December 2015 Swaps Review

Happy New Year to our readers. Continuing with our monthly review series, let’s take a look at Interest Rate Swap volumes in December 2015.

First the highlights:

  • On SEF USD IRS Dec 2015 volume was similar to Nov 2015
  • With Outrights and Curve trades higher, while Spreadovers and Butterflys lower
  • The Fed Rate Rise on Dec 16 had no material impact on monthly volumes
  • USD Swap Curve was up 15 bps across the term structure
  • USD SEF Compression volumes were back up from Nov lows and close to Sep volumes
  • CMELCH Basis Spreads tightened
  • CME-LCH Switch trade volume was $50b, down from Nov, but above the monthly average
  • Global Cleared Volumes in G4 Ccys were lower than Nov and similar to Sep

Onto the charts, data and details.


Using SDRView lets start by looking at gross-notional volume of On SEF USD IRS Fixed vs Float and only trades that are price forming, so Outrights, SpreadOvers, Curve and Butterflys.


Showing that:

  • December gross notional is >$1.175 trillion
  • (recall capped trade rules mean this is understated as the full size of block trades is not disclosed)
  • Just above Nov and Oct and just below Sep
  • So the Fed Rate Rise on Dec 16 happened as expected and had no impact on volumes
  • Compared to Dec 2014, gross notional is down 14%
  • Recall Nov 2015 was 25% higher than Nov 2014, so a case of up one month and down the next

And splitting by package type and showing DV01 (adjusted for curves and flys).


Showing that:

  • Outright trades DV01 was higher than Oct and Nov and similar to Sep
  • Curve trades DV01 was higher than each of the prior three months
  • Spreadover and Butterfly DV01 was lower than each of the prior three months
  • Overall $525 million of DV01 was traded in the month
  • (recall capped trade rules mean this is understated)

And gross notional of non-price forming trades; Compression and Rolls


Showing that:

  • Compression activity is back up from Nov lows
  • At >$208b in Dec, vs >$136b in Nov and >$285b in Oct
  • IMM Rolls volume in Dec are similar to Sep (the prior roll month)

USD IRS Prices

Lets now take a look at what happened to USD Swap prices in the month.


Showing a rise of 15 bps across most tenors, not much of a surprise there as consistent with the Fed Rate Rise.

CME-LCH Basis Spreads and Volumes

CME-LCH Basis Spreads tightened during the month. Lets look at the Tradition page from 31 Dec.


Showing that all tenors were lower than Nov highs and Nov month end. (See November Review)

And what about CME-LCH Switch trade volumes?


Showing that at $50 billion gross notional they are down from the $75b high in Nov but remain well above $35b monthly average of Sep and prior months in 2015. Clearly for a two way market to trade there are participants with different positions and opinions on the direction of the spread.

Market share wise, Tradition just slightly ahead of ICAP this month.


Lets also take a look at On SEF volumes of IRS in the other three major currencies.


Showing that for price-forming trades EUR volumes were higher than prior months, while the overall gross notional in these three currencys of >$177b in Dec is just 15% of the USD volume.

And then looking at SEF Compression activity.


Shows that Dec while down from Nov, is still well above prior months and EUR in particular is the highest of any month in our period.

SEF Market Share

Usually we now look next at market share, but I am going to leave that to the upcoming Review of 2015.

Global Cleared Volumes

So lets end with CCPView and Global Cleared Swap Volumes for EUR, GBP, JPY & USD Swaps.


Showing that Dec is down from Nov and comparable with Sep volumes.

LCH SwapClear volume is lower in Dec than Nov.

CME volume in Dec appears higher than Nov, but drilling down into this:


Shows a large $2 trillion on 2-Dec.

Last time we saw such a large figure was Sep 2 and that was due to TriOptima Compression, which given that it is exactly 3 months later, suggests another quarterly compression run. In-fact by looking at CME Open Interest in CCPView, we can indeed see that this drops from end Nov to end Dec by just over $ 2 trillion, confirming our hypothesis.

We would then estimate the CME volume in Dec was approximately $1.3 trillion, lower than Nov and similar to its Oct figure.

LCH SwapClear at $14.2 trillion in Dec, is also down from Nov and similar to its Sep figure.

JSCC at $400 billion in Dec is similar to its Oct figure.

Thats it for today.

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