Trading RFRs

Clarus will be talking about trading RFRs at the ISDA/SIFMA AMG Benchmark Strategies Forum 2020 in London next week, February 26th 2020. For more information on the event and to register, please check out the event details page. It is free to attend for the buyside.

Among the topics, you will hear our thoughts on:

RFR Trading Reached a Record in January 2020

Volumes of RFR products hit record volumes in January 2020. Hear from the panel as to what has been driving the recent activity:

RFR notional equivalents across swaps and futures

What can help transition trading into longer tenors?

RFR trading continues to be dominated by activity in the short-end of markets. For example, the tenor profile of GBP SONIA trading is very much dominated by tenors shorter than 2 years:

DV01 profile of GBP cleared swaps shows most activity is short-dated

The chart above masks the fact that activity in the longer-end is growing. It is just growing at a much slower rate:

Will this slight uptick in activity at the long-end significantly accelerate soon? Are the lessons being learned in GBP markets applicable to other currencies as well?

There will be a discounting “big-bang” for both USD and EUR markets in 2020.

October of this year will see a “big-bang” switch for SOFR when the major Rates CCPs (LCH and CME) will change their discounting of LIBOR-indexed swaps from Fed Funds to SOFR. A similar event will occur in June for EURIBOR-indexed EUR swaps switching from EONIA discounting to €STR. How will these discounting changes at the CCPs impact RFR trading?

What will the impact be on Swaptions markets?

I don’t expect this to be an easy question to answer. The change in discounting rates at CCPs will change the valuation of swaptions due to the change in valuation of the underlying swap. How will this impact markets and are there any potential solutions being discussed?

The Panel

Fortunately for the audience, it won’t just be Clarus speaking. The panel includes some well known names in the industry who will be able to provide far more intelligent commentary than we can!

We look forward to seeing you at the event next week. Remember to register on the event page here and please say Hi on the day. We always like to meet our readers!

Stay informed with our FREE newsletter, subscribe here.