RFR Adoption Flattens Out in July
Posted by Colin Lambert. Last updated: August 9, 2022
After a sustained run of increasing influence as global authorities press the accelerator on decommissioning Ibors, risk-free rate adoption was flat at 46.4% in July according to the ISDA-Clarus RFR Adoption Indicator.
The indicator tracks how much global trading activity (as measured by DV01) is conducted in cleared OTC and exchange-traded interest rate derivatives (IRD) that reference the identified risk-free rates in six major currencies.
On a traded notional basis, the percentage of RFR-linked IRD comprised 39.0% of total IRD in July compared to 39.8% in June. RFR-linked IRD DV01 decreased to $13.7 billion from $18.0 billion the prior month, while total IRD DV01 declined to $29.5 billion from $38.8 billion.
RFR-linked IRD traded notional decreased to $67.3 trillion from $86.5 trillion and total IRD traded notional declined to $172.8 trillion compared to $217.4 trillion.
It was not all a slowdown, however, for the percentage of trading activity in SOFR increased to an all-time high of 51.7% of total USD IRD DV01 transacted in July compared to 49.7% in June. Equally, GBP saw the largest percentage of RFR-linked IRD trading activity, totalling 99.7% of total GBP IRD DV01 and JPY had the highest percentage of RFR-linked IRD DV01 executed as transactions with tenors longer than two years.