- The ISDA-Clarus RFR Adoption Indicator has stayed above 50% for the second month.
- In September 2022 it remained at 51%.
- SOFR adoption was at 56.6%, the second highest on record.
- €STR trading increased to 23.5%.
- Trading activity in RFRs hit all-time records across DV01 and notional amounts traded.
The ISDA-Clarus RFR Adoption Indicator for September 2022 has now been published.
- RFR adoption was almost identical to last month at 51% of the Rates market.
- SOFR adoption was the second highest on record, at 56.6% (after last month’s record at 57.2%).
- €STR adoption increased (finally!) to the second highest ever at 23.5%.
- There were a number of records – see below for a full breakdown:
- At 45% of total activity, this was the highest proportion by notional of RFR trading.
- At $102.2 Trn, this was the largest amount of RFR-linked notional ever transacted.
- At $19.2bn, this was the largest amount of RFR-linked DV01 ever transacted.
- At $12.06bn, this was the largest amount of SOFR-linked DV01 ever transacted.
- Total notional traded of nearly $228Trn made it the fifth most active month since we started the RFR Adoption Indicator.
We tend to focus on DV01 traded on this blog, but we know that markets continue to appreciate the relative simplicity of notional measures as well. A chart we do not comment on that often is Chart 3: Total IRD Notional traded each month:
- A record 45% of notional was transacted versus RFRs in September 2022.
- That was 1% higher than last month, the previous all time record (at 44%).
- Because September 2022 saw elevated volumes of trading, this made it the all time greatest amount of RFR-linked notional ever traded.
- It is the first time over $100Trn in RFR-linked derivatives have traded in a single month.
- We all love big numbers so it’s nice to break the 1 x 10^14 barrier 😛
Having shone the light on the notional amounts first, I revert to type and look at DV01 again. We recorded an all-time high at $19.2bn on RFR-linked DV01 transacted (across all currencies):
The chart below was a bit of a surprise to me. I wasn’t sure how SOFR adoption would fare across the IMM roll in September. Would Eurodollar volumes recover as existing Sep positions were rolled into Dec? The chart below shows that SOFR adoption was actually very strong:
- From under 10% just a year ago, SOFR futures made up over 70% of traded volumes across Eurodollars and SOFR futures.
- This chart excludes Fed Funds futures volumes, which have been very volatile all year.
- From a transition story, I believe that we should be most interested in the move of volumes from LIBOR-based products (Eurodollars) to RFR based products (SOFR).
- The consistent move higher in the SOFR “market share” here suggests that old Eurodollar positions have indeed been rolled into new SOFR positions.
- A really strong sign for transition!
- It was a record month for RFR trading across many metrics.
- A larger portion of notional was transacted versus RFRs than ever before.
- A record amount of RFR-linked DV01 was transacted (across all currencies).
- Transition is continuing nicely from Eurodollar liquidity to SOFR in futures space.