Continuing with our monthly Swaps review series, let’s look at volumes in January 2017.
- USD IRS price-forming volume > $2.3 trillion gross notional
- 21% higher than a year earlier
- On SEF vs Off SEF at 62% to 38% is lower than average; 65% to 35%
- SEF Compression activity in USD IRS was > $220 billion
- USD OIS volume at > $1.5 trillion, 12% higher than a year earlier
- On SEF EUR, GBP, JPY IRS volumes at > $250 billion are up 64% from a year earlier
- SEF Compression in EUR, GBP, JPY was also strong at > $56 billion
- Volume for USD, EUR, GBP, IRS, OIS, Basis Swaps was $1.5 billion DV01
- Bloomberg re-gaining its lead from Tradeweb
- ICAP, Tullet, Tradition each up from prior months
- As were BGC and DW
- CME–LCH Switch volume was a record $116 billion gross notional
- Driven by Tullet with $38b in 2Y
- An unusually large volume in 2Y, where the basis is only 0.1bps
- Global Cleared Volumes are up at $19.4 trillion
- LCH SwapClear up 9%
- In Asia volumes are similar to the prior month
- In LatAm volumes are up with CME gains
- Inflation Swaps at LCH SwapClear just above their Nov high
- NDFs steady at LCH ForexClear and close to recent highs
Onto the charts, data and details.
USD IRS ON/OFF SEF
- January 2017 On SEF gross notional is > $1,430 billion ($1.43 trillion)
- (recall capped trade rules mean this is understated as the full size of block trades is not disclosed)
- This is 19% higher than January 2016
- January 2017 Off SEF gross notional is > $880 billion
- 23% higher than January 2016
- And On SEF vs Off SEF is 62% to 38%
- Lower than the 65% to 35% average
- In DV01 terms January 2017 was 17% higher than January 2016
- Overall >$570 million of DV01 was traded in the month
- (recall capped trade rules mean this is understated)
And gross notional of On SEF non-price forming trades; SEF Compression and Rolls.
- SEF Compression in January 2017 was > $220 billion
- 66% higher than January 2016
- 37% lower than December 2016
USD OIS Swaps
Next USD OIS Swaps volumes.
- January 2017 volumes similar to the prior month
- 12% higher than January 2016
- Off SEF gross notional is 54% higher than Jan 2016 and On SEF 24% lower
- The increase in Off SEF and decrease in On SEF is noteworthy
- Not something we have observed for any other product
- The combined UDS OIS total in January 2017 is > $1.5 trillion
- Lower than the > $2.31 trillion of USD IRS in the month
- (recall capped trade rules mean these are understated as the full size of block trades is not disclosed)
USD IRS Prices
Lets now take a look at what happened to USD Swap rates in the month.
Showing that 30Y Swap rates were up 5bps in the month, 10Y +2.5bps and 2Y also +2.5bps, a relatively quiet month with rates continuing the upward trend since early November 2016.
EUR, GBP, JPY Swaps
Next On SEF volumes of IRS in the other three major currencies.
- Volumes in January 2017 are up 64% from January 2016
- EUR up 87%, JPY up 29% and GBP up 68%
The overall gross notional in these currencies of >$255 billion is 18% of the USD IRS ON SEF volume.
Next SEF Compression activity.
Showing that January 2017 volume was > $56 billion, down from prior months, but 100% higher than Jan 2016 and equivalent to 26% of the USD IRS Compression figure of >$220 billion.
EONIA and SONIA
Next lets check how volumes in EONIA & SONIA have performed.
Showing overall volumes in January 2017 at >$656 billion are 13% lower than Jan 2016, but much higher than the $184 billion of EUR and GBP IRS volumes.
Compared to the $1.5 trillion of USD OIS, EONIA and SONIA volume is 44%.
SEF Market Share
DV01 (in USD millions) by month for USD, EUR, GBP and by each SEF, including SEF Compression trades for the prior three months.
- January volume at $1.5 billion DV01 is lower than the $1.68 billion in Dec but similar to Nov
- Bloomberg is significantly up at $418 million DV01 to re-capture the lead
- Tradeweb is significantly down, due to lower compression volumes from the record high in Dec
- TrueEx volumes down from Dec and similar to Nov
- All the D2D SEFs are up from both Nov and Dec
- ICAP in the lead with $208 million DV01
- Closely followed by Tullet and Tradition
- Next BGC and Dealerweb
In gross notional terms $2.2 trillion of USD IRS traded On SEF in January 2017.
From SDRView data above, we know that $1.43 trillion of price forming capped gross notional and $220 billion of capped compression and roll volumes was reported for On SEF, a total of $1.65 trillion. This is $550 billion less than the $2.2 trillion reported for USD IRS by SEFs.
Put another way the SDR total figure of $1.65 trillion for USD IRS On SEF should be increased by 33% to be equivalent to the actual notional of $2.2 trillion reported by SEFs.
CCP Basis Spreads and Volumes
- Overall volume in January was $116 billion, higher than the $93 billion in December
- Driven by a massive increase at Tullet from $9 billion to $59 billion!
- Tullet volume is driven by the 2Y tenor, with 3 business days > $10 billion
- Interesting to see such large volume in 2Y when the Basis for 2Y is around 0.1 bps
- Tradition down from $63billion to $37 billion
- ICAP similar to prior month at $17 billion
- Dealerweb up to $3.5 billion
A table of January volumes by SEF and Tenor is interesting.
- The tenors that traded, from 1Y to 30Y
- Tullet with $38b at 2Y by far the largest notional
- Tradition with $12.6b at 5Y the next largest
- Volume below 3Y is unusually larger than normal
- Some of the above volume will have traded as switches e.g. 5Y vs 10Y
- (but we are not able to identify that from the figures)
Converting this notional volume to a DV01 basis, we get Tradition $22m, Tullet $18m, ICAP $14m and DW 3m.
CME-LCH Basis Spreads ended the month at 3.30 bps for 10Y and 5 bps for 30Y, close to their highs.
Global Cleared Volumes
- Overall Global Cleared Volumes in January 2017 of $19.4 trillion
- LCH SwapClear volume at $17.2 trillion, is up 9%
- CME volume at $1.4 trillion, is down 4%
- JSCC volume at $700 billion, is down 13%
- Eurex with $40 billion, down from $64 billion
- BME with $180m
Asia and LatAm
Next the volume of AUD, HKD, SGD Swaps (including Vanilla, OIS, Basis, Zero Coupon).
- LCH SwapClear at $820 billion, similar to the prior month
- ASX at $133 billion, also similar to the prior month
- CME at $5 billion, down from $15 billion
- SGX at $7 billion, down from $6 billion
Next the volume of MXN and BRL Swaps.
- CME at $400 billion, up from $324 billion in the prior month
- Asigna/Mexder with $9.3 billion, up from $3.5 billion (all MXN)
- LCH SwapClear showing $124 million (all MXN)
- All the volume is at LCH SwapClear
- Total in January is $115 billion, up 22% from the prior month
- Higher than the previous record high of $110 billion in November
- And massively up from the $15 billion in August 2016 (before UMR)
- EUR is the largest currency in January at $56 billion
- USD next with $36 billion and GBP $23 billion
- LCH ForexClear with the vast majority of the volume
- Growing from $75 billion in August to $370 billion in November
- Steady at this level for the most recent three months
- Comder averaging $20 billion a month
- SGX just showing (< $50 million)
That’s it for today.
Thanks for staying to the end.
Our Swaps review series is published monthly.