RFR Adoption Hits New High

The adoption of risk-free rates (RFRs) for benchmarks continues as markets, slowly, exit Ibors, with the ISDA Clarus RFR Adoption Indicator hitting a new high in March.

The indicator, which 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 RFRs in eight major currencies, hit 56.6%, a sharp increase from the 52.9% reported in February.

On a traded notional basis, the percentage of RFR-linked IRD rose to 52.3% of total IRD transacted in March 2023 compared to 49.1% in February. RFR-linked IRD DV01 increased to $33.8 billion from $22.6 billion, and total IRD DV01 rose to $59.8 billion compared to $42.8 billion the prior month. RFR-linked IRD traded notional increased to $200.4 trillion from $125.5 trillion, while total IRD traded notional increased to $383.6 trillion compared to $255.4 trillion.

The percentage of trading activity in SOFR rose to 61.5% of total USD IRD DV01 in March 2023 compared to 59.1% in February, while CHF, GBP and JPY RFR-linked IRD DV01 accounted for 100% of total CHF IRD DV01, 99.9% of total GBP IRD DV01 and 98.5% of total JPY IRD DV01, respectively.

JPY had the highest percentage of RFR-linked IRD DV01 executed as transactions with tenors longer than two years.