A Global Trading Summary of Interest Rate Markets
» Highlights
» Volume
» Credit Spreads
» Deliveries
» Cash Market
Penetration
» Foreign Holdings of
Treasury Securities
» Historical Volatility
Also including Interest Rate Futures Liquidity Report
Third Quarter 2012
Quarterly Interest RateReview
How the world advances
INTEREST RATES
0
www.cmegroup.com/interestrates
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UPDATE ON INTEREST RATE PRODUCTS
Deliverable Interest Rate Swap Futures Available December 3, 2012
Deliverable Swap Futures offers a capital-efficient way to access interest rate swap exposure with the benefits of futures. Margin efficiencies for a capital-constrained world
Futures-style margining, which equates to margins that are approximately 50% lower than cleared IRS Risk offsets with Eurodollar and Treasury futures and options Automatic netting of positions Coming in early 2013 - Portfolio margining with cleared OTC interest rate swaps
Developed in close collaboration with buy- and sell-side participants
Credit Suisse, Citi, Goldman Sachs, Morgan Stanley among firms planning to serve as market makers Flexibility to roll the futures position or take delivery of a CME cleared interest rate swap Choice of execution via CME Globex, block trades, EFRPs and Open Outcry on the trading floor Participants can trade in an OTC manner – ability to block calendar spreads with:
─ Lower block thresholds ─ Longer reporting times ─ No block surcharges
Learn more at cmegroup.com/dsf
Strong Growth of Treasury Options Continues Third quarter highlights included:
50% of all Treasury options executed on the CME Globex platform
60% of all Treasury Bond options traded electronically
Weekly Treasury Options (WTOs) surpassed 101,000 contracts (a new single-day record) on September 7, 2012, on Non-Farm Payroll news.
Learn more at cmegroup.com/iroptionsvolume
Portfolio Margining Extends to Customer Accounts Savings Up to 90% CME Group is approved to offer portfolio margining of our Eurodollar and Treasury futures and cleared OTC IRS products for both house and customer accounts.
Operational readiness dates for customer accounts – November 19, 2012 Clearing members have already been taking advantage of these cost savings to significantly reduce
their initial margins requirements To date, the program has helped provide capital efficiencies of up to 90% for certain portfolios
Learn more about your potential savings
Quarterly Interest Rate Review
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HIGHLIGHTS Third Quarter 2012 Volume and Open Interest
• Average Daily Volume (ADV) for U.S. Treasury futures was 2,085,559 contracts per day for the third quarter of 2012.
• Open interest for U.S. Treasury futures was 5,007,700 contracts at the end of the third
quarter of 2012, an increase of 10% from the third quarter of 2011.
• Average Daily Volume (ADV) for Eurodollar futures was 1,580,272 contracts per day for the third quarter of 2012.
• Average Daily Volume (ADV) for U.S. Treasury options was 330,911 contracts per day for the third quarter of 2012.
• Average Daily Volume (ADV) for Eurodollar options was 488,696 contracts per day for the
third quarter of 2012.
Weekly U.S. Treasury options have produced cumulative volume of more than 6.75 million contracts since being launched on January 24, 2011.
Record 54% of all Treasury options traded were traded on CME Globex in September
2012.
• Average Daily Volume (ADV) for 2-Year T-Note options was 20,388 contracts per day for the third quarter of 2012, an increase of 94% from the third quarter of 2011.
• Average Daily Volume (ADV) for the 4-Year Mid-Curve options was 70,000 per day for the
third quarter of 2012 compared to 5,700 per day in Q3 2011.
• Average Daily Volume (ADV) for the 3- and 4-Year Mid-Curve options was 233,000 contracts per day for the third quarter of 2012, an increase of 166% from the third quarter of 2011.
Ultra T- Bond futures posted third quarter 2012 ADV of 60,965 contracts and open interest
of 364,820 at the end of the third quarter of 2012.
www.cmegroup.com/interestrates
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‐50
‐40
‐30
‐20
‐10
0
10
20
Jan‐09 Apr‐09 Jul‐09 Oct‐09 Jan‐10 Apr‐10 Jul‐10 Oct‐10 Jan‐11 Apr‐11 Jul‐11 Oct‐11 Jan‐12 Apr‐12 Jul‐12
Basis Points
30‐Year Swap Spread 30‐Year Treasury Bond Yield ‐ Interest Rate Swap Yield
Source: Bloomberg
0
20
40
60
80
100
120
140
160
180
200
210
220
230
240
250
260
270
280
Jan‐07 Jun‐07 Nov‐07 Apr‐08 Sep‐08 Feb‐09 Jul‐09 Dec‐09 May‐10 Oct‐10 Mar‐11 Aug‐11 Jan‐12 Jun‐12
Cash Spread
(bps)
Futures Spread
Trading The NOB
futures
cash
Source: Bloomberg
The daily futures chart represents: 5*(TY Futures Price) ‐ 3*(US Futures Price)The daily cash chart shows the yield spread of on‐the‐run 30‐Year and 10‐Year
Quarterly Interest Rate Review
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0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Green Blue Gold 2‐Year 3‐Year 4‐Year 5‐Year
Quarterly Pack and Bundle Volume
Q1 '12
Q2 '12
Q3 '12
0%
10%
20%
30%
40%
50%
60%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
550,000
600,000
Volu
me
U.S. Treasury Options ‐Monthly Average Daily Volume ADV Pit ADV Electronic Percent Electronic
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0%
2%
4%
6%
8%
10%
12%
14%
‐
100,000
200,000
300,000
400,000
500,000
600,000
U.S. Treasury Options CME Globex and Pit ADV by Time Zone
RTH‐Pit RTH‐Globex ETH‐Europe ETH‐Asia % ETH
Percent of total average daily volume (ADV) executed in extended trading hours (CME Globex). ADV includes open outcry.
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
Eurodollar Options CME Globex and Pit ADV by Time Zone
RTH‐Pit RTH‐Globex ETH‐Europe ETH‐Asia % ETH
Percent of total average daily volume (ADV) executed in extended trading hours (CME Globex). ADV includes open outcry.
Quarterly Interest Rate Review
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0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
Local (Chicago) Time
Treasury Futures: Hourly Distribution of Electronic Volume(Hourly Volume as % Share of Volume, July 1 ‐ September 30, 2012)
Asian Hours (5pm-12am)European Hours (12am-7am)US Hours (7am-4pm)
% of Volume per Time ZoneAsian Hours- 3%European Hours- 17%U.S. Hours- 80%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
Local (Chicago) Time
Treasury Options: Hourly Distribution of Electronic Volume(Hourly Volume as % Share of Volume, July 1‐ September 30, 2012)
Asian Hours (5pm-12am)European Hours (12am-7am)US Hours (7am-4pm)
% of Volume per Time ZoneAsian Hours - 2%European Hours - 21%US Hours - 77%
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0%
2%
4%
6%
8%
10%
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
2‐Year and 5‐Year U.S. Treasury Note FuturesMonthly Historical Volatility(3‐Month Moving Average)
2-Year 5-Year
Source: CME Group
0%
5%
10%
15%
20%
25%
30%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
10‐Year Note and Classic T‐Bond U.S. Treasury FuturesMonthly Historical Volatility(3‐Month Moving Average)
10-Year Classic T-Bond
Source: CME Group
Quarterly Interest Rate Review
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0%
5%
10%
15%
20%
25%
30%
1/10 4/10 7/10 10/10 1/11 4/11 7/11 10/11 1/12 4/12 7/12 10/12
Ultra Bond U.S. Treasury FuturesMonthly Historical Volatility(3‐Month Moving Average)
Source: CME Group
www.cmegroup.com/interestrates
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0%
5%
10%
15%
20%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
5‐Year and 10‐Year U.S. Interest Rate Swap FuturesMonthly Historical Volatility(3‐Month Moving Average)
5-Year 10-Year
Source: CME Group
0%
5%
10%
15%
20%
25%
30%
35%
2007 2008 2009 2010 2011 2012
7‐Year and 30‐Year U.S. Interest Rate Swap FuturesMonthly Historical Volatility(3‐Month Moving Average)
7-Year 30-Year
Source: CME Group
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Quarterly Interest Rate Review
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0%
20%
40%
60%
80%
100%
0
25,000
50,000
75,000
100,000
125,000
1990 1995 2000 2005 2010
2‐Year U.S. Treasury Note Futures
Delivered Contracts and as Percent of Open Interestof Expiring Contract on First Position Day
Delivered (Left) Percent (Right)
Source: CME Group
0%
20%
40%
60%
80%
0
50,000
100,000
150,000
200,000
1990 1995 2000 2005 2010
5‐Year U.S. Treasury Note Futures
Delivered Contracts and as Percent of Open Interestof Expiring Contract on First Position Day
Delivered (Left) Percent (Right)
Source: CME Group
www.cmegroup.com/interestrates
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0%
8%
16%
24%
32%
40%
0
50,000
100,000
150,000
200,000
250,000
1990 1995 2000 2005 2010
10‐Year U.S. Treasury Note Futures
Delivered Contracts and as Percent of Open Interestof Expiring Contract on First Position Day
Delivered (Left) Percent (Right)
Source: CME Group
0%
5%
10%
15%
20%
0
15,000
30,000
45,000
60,000
1990 1995 2000 2005 2010
Classic U.S. Treasury Bond Futures
Delivered Contracts and as Percent of Open Interestof Expiring Contract on First Position Day
Delivered (Left) Percent (Right)
Source: CME Group
Quarterly Interest Rate Review
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0%
10%
20%
30%
40%
0
15,000
30,000
45,000
60,000
03/10 06/10 09/10 12/10 03/11 06/11 09/11 12/11 03/12 06/12 09/12 12/12
Ultra U.S. Treasury Bond Futures
Delivered Contracts and as Percent of Open Interestof Expiring Contract on First Position Day
Delivered (Left) Percent (Right)
Source: CME Group
www.cmegroup.com/interestrates
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44.1%
34.4%32.6%
24.3%
15.0% 14.7% 14.7%
10.8% 10.4% 10.1%
France Mexico Switzerland Turkey Spain United Kingdom Chile Colombia Singapore Norway
Largest Quarter‐over‐Quarter Increases (Percent)in Foreign Holdings of U.S. Treasury Securities
August 2012
Source: U.S. Treasury Department
‐0.9%
‐1.6%‐1.8%‐2.1%
‐3.0%
‐5.3%
‐5.8%
‐6.9%
‐10.9%‐11.1%
ChinaGermanyIrelandRussiaHong KongMalaysiaDenmarkSouth KoreaSouth AfricaAustralia
Largest Quarter‐over‐Quarter Decreases (Percent)in Foreign Holdings of U.S. Treasury Securities
August 2012
Source: U.S. Treasury Department
\
Quarterly Interest Rate Review
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49.5%
27.3%
12.0%
6.5%4.7%
U.S. Asia Europe Americas ex‐U.S. All Other
Regional Holdings ofU.S. Treasury Securities (Percent)
August 2012
Source: U.S. Treasury Department
37.0% 36.5%
8.2% 8.2%
4.3% 4.2%
1.7%
Caribbean BankingCenters
Brazil Canada Mexico Chile Colombia Peru
Americas ex‐U.S. Holdings ofU.S. Treasury Securities (Percent)
August 2012
Source: U.S. Treasury Department
www.cmegroup.com/interestrates
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39.2%38.1%
6.7%4.7%
3.1%2.0% 1.8% 1.5% 1.3% 0.9% 0.7%
China Japan Taiwan Hong Kong Singapore Thailand India South Korea Philippines Australia Malaysia
Asia Holdings ofU.S. Treasury Securities (Percent)
August 2012
Source: U.S. Treasury Department
15.6%
11.9% 11.9%11.0%
10.2%
7.1%
5.7%5.3% 5.0%
2.7% 2.3% 2.2% 2.1% 2.0% 2.0% 1.9%1.1%
Switzerland
United Kingdom
Russia
Belgium
Luxembourg
Ireland
Norw
ay
France
Germany
Turkey
Poland
Swed
en
Italy
Israel
Netherlands
Spain
Denmark
Europe Holdings ofU.S. Treasury Securities (Percent)
August 2012
Source: U.S. Treasury Department
Quarterly Interest Rate Review
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0
50
100
150
200
250
300
350
400
2006 2007 2008 2009 2010 2011 2012*The CFTC defines large open interest holders as having at least
600 open contracts in Fed Funds and 3,000 in Eurodollars.
Fed Funds and Eurodollar FuturesNumber of Large Open Interest Holders*
Fed Funds Eurodollars
Source: Commodity Futures Trading Commission
0
50
100
150
200
250
300
350
2006 2007 2008 2009 2010 2011 2012*The CFTC defines large open interest holders as having at least 1,000 opencontracts in 2-Year Notes; 2,000 in 5-Year Notes; and 2,000 in 10-Year Notes.
Treasury Note FuturesNumber of Large Open Interest Holders*
2-Year Notes 5-Year Notes 10-Year Notes
Source: Commodity Futures Trading Commission
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0
50
100
150
200
250
2006 2007 2008 2009 2010 2011 2012*The CFTC defines large open interest holders as having at least1,500 open contracts in Classic Bonds and 1,500 in Ultra Bonds.
Treasury Bond FuturesNumber of Large Open Interest Holders*
Classics Ultras
Source: Commodity Futures Trading Commission
0
10
20
30
40
50
60
2006 2007 2008 2009 2010 2011 2012*The CFTC defines large open interest holders as having at least500 open contracts in 5-Year Swaps and 500 in 10-Year Swaps.
Swap FuturesNumber of Large Open Interest Holders*
5-Year Swaps 10-Year Swaps
Source: Commodity Futures Trading Commission
Quarterly Interest Rate Review
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How Liquidity is Calculated • Globex order book liquidity data are calculated utilizing time‐weighted‐
average (TWA) Globex order book sizes at each generic price level (i.e. best bid/offer, 2nd best, 3rd best, 4th best, and 5th best).
• Bid/Ask Qty 1 = the average Best Bid and Offer book sizes and are also referred to as the “Top of the Book”. Bid/Ask Qty 2 = the average order book sizes at the 2nd‐best bid and 2nd‐best offer, and so on.
• The bid and offer sizes are averaged together, such that if the TWA Best bid size = 36 and the TWA Best offer size = 34, then the Avg Bid/Ask Qty 1 would equal 35.
• The time‐weighted‐averages are derived from 7:00 am – 4:00 pm, Chicago time, unless otherwise noted.
Interest Rate Futures Liquidity
Report
www.cmegroup.com/interestrates
21
Eurodollar Futures Liquidity Blue (4th) Year Liquidity
Eurodollar Futures Liquidity Gold (5th) Year Liquidity
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Quarterly Interest Rate Review
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CME Group Interest Rate ProductsCME Group is the world’s leading marketplace for trading short-, medium- and long-term interest rate
derivative products. Spanning the entire U.S. dollar-denominated yield curve, our products include
futures and options on the most widely followed U.S. interest rate benchmarks: Eurodollars, U.S. Treasury
securities, 30-Day Fed Funds, and Interest Rate Swaps. In addition, we offer central counterparty clearing
for OTC Interest Rate Swaps. The liquidity, transparency and security of CME Group interest rate markets
provide customers around the world with safe, efficient means for managing interest rate risk. Backed
by our central counterparty clearing model, we offer powerful solutions to address a wide variety of risk
management needs.
In New YorkSean Tully, Managing Director212 299 [email protected]
In ChicagoPete Barker, Executive Director 312 930 [email protected]
Steve Dayon, Executive Director 312 466 4447 [email protected]
Mike Kamradt, Executive Director 312 466 [email protected]
Jonathan Kronstein, Senior Director 312 930 3472 [email protected]
Dave Reif, Senior Director 312 648 3839 [email protected]
Suzanne Spain, Director 312 338 2651 [email protected]
In SingaporeLouis Chong, Executive Director 65 6593 5588 [email protected]
In LondonDavid Coombs, Executive Director 44 20 3379 [email protected]
For more information, please contact the Interest Rate Products Team:
You may also reach us at: [email protected] or 866 501 3646.
IR277.3/0/1112
Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles. And only a portion of those funds should be devoted to any one trade because they cannot expect to profit on every trade.
All references to options refer to options on futures.
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