Continuing with our monthly review series, let’s take a look at Interest Rate Swap volumes in May 2016.
First the highlights:
- On SEF USD IRS in May 2016 volume was 10% lower than May 2015
- The lower volumes we saw in April have continued in May
- USD SEF Compression volumes were up from April and similar to May 2015
- USD Swap Curve pivoted up with short rates up 14 bps and long rates down 5 bps
- SEF Compression in EUR Swaps at > $52b is the highest on record
- SEF Market Share has Tradeweb in the lead, driven by very strong compression volumes
- Bloomberg is next, with its lowest share in the past 4 months
- Followed by Tradition, ICAP, Tullet all close together
- CME–LCH Switch volumes at $43b are up from Mar and Apr
- Global Cleared Volumes show similar volume to Apr, so down from Feb & Mar
- LCH SwapClear had 90% share in G4 Swaps in the month
- LCH SwapClear AUD OIS volumes are significantly up again, continuing the YTD trend
Onto the charts, data and details.
USD IRS ON SEF
- May 2016 gross notional is >$987 billion
- (recall capped trade rules mean this is understated as the full size of block trades is not disclosed)
- 21% lower than March 2016
- 10% lower than May 2015
- So the trend of lower volumes we saw in April has continued in May
- In DV01 terms May 2016 was 20% lower than March 2016
- Overall >$395 million of DV01 was traded in the month
- (recall capped trade rules mean this is understated)
- Compared to May 2015, DV01 is 13% lower
- With the relative percentage of Outrights higher
And gross notional of non-price forming trades; Compression and Rolls.
- Higher Compression in the month with >$170 billion
- Compared to >$123b in April and $240b in March
- Similar to May 2015
USD IRS OFF SEF
- On SEF vs Off SEF for May 2016 was 60% to 40%,
- Lower than the 64% v 36% in March 2016,
- But higher than the 56% to 44% in May 2015.
USD IRS Prices
Lets now take a look at what happened to USD Swap rates in the month.
- Swap Curve pivoted Up centred on 10Y
- Short Rates were up 14 bps
- Medium Rates 5 to 10 bps
- 30Y down 5 bps
- Generally the upward trend was a continuation of April and May
EUR, GBP, JPY Swaps
Next On SEF volumes of IRS in the other three major currencies.
- Lower volume compared to April 2016
- With EUR and JPY down and GBP up
- Volumes 11% lower compared to May 2015
The overall gross notional in these currencies of >$168 billion is 17% of the USD volume in May 2016.
And then SEF Compression activity.
Showing record SEF compression in EUR at > $52 billion, significantly higher than an average month and 36% higher than the previous high of $38b in March 2016.
SEF Market Share
DV01 (in USD millions) by month for USD, EUR, GBP and by each SEF, including SEF Compression trades and use a chart to compare the relative share in May 2016 with the prior three months.
- May volume is lower than April and the lowest YTD
- Not a great month for SEF volumes (as we saw earlier from SDR data)
- Tradeweb overtakes Bloomberg to take top spot with 30%
- (Most likely driven by strong compression volumes in EUR and USD IRS)
- Bloomberg is next highest with 24%, its lowest share in the past 4 months
- Tradition 13%, ICAP 12%, Tullet 11% are each similar to the prior month
- BGC 3.5%, Dealerweb 3.5%, TrueEx 2% are also as in the prior month
CCP Basis Spreads and Volumes
- Overall volume in May was $43 billion gross notional
- Up from March and April low $30b figures
- But still below the >$50 billion in Feb
- Tradition has the largest share in the month with 62%
- ICAP is next with 20% and then Tullet with 12%
- Dealerweb showing its highest volume with 6% ($2.5b)
CME-LCH Basis Spreads remained at similar levels to the prior month with 30Y at 3.30 bps.
Global Cleared Volumes
- Overall Global Cleared Volumes at similar low levels to April
- (Just as we have seen in US SDR and US SEF data)
- LCH SwapClear volume at $15.4 trillion, is up from its April $13 trillion
- Which at 90% share is it’s highest in this period and up from high 80s
- CME at $1.05 trillion, is similar to its April $1.2 trillion
- JSCC at $500 billion, is the same as April
- Eurex with $70 billion is also the same as April
And last but not least, the volume of AUD, HKD, SGD Swaps (including Vanilla, OIS, Basis, Zero Coupon).
Finally a chart with May higher than prior months!
- LCH SwapClear again increasing volume significantly
- Due to a continued increase in AUD OIS volumes
- ASX volumes are also significantly up
- CME and SGX down
- HKEX still very small
Thats it for today.
Thanks for staying to the end.
Our Swaps review series is published monthly.