RFR Adoption Rate Recovers
Posted by Colin Lambert. Last updated: August 14, 2023
After two months around the ending of USD Libor when the adoption rate dropped, the industry appears to be increasing its use of risk-free rates (RFRs) again, with the ISDA-Clarus RFR Adoptions Indicator for July returning to levels seen in April.
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 RFRs in eight major currencies, rose to 60.6%, up from 58.1% in June.
On a traded notional basis, the percentage of RFR-linked IRD increased to 57.9% of total IRD transacted in July 2023 compared to 55.6% the prior month, while RFR-linked IRD DV01 fell to $19.2 billion from $23.2 billion the prior month.
Total IRD DV01 dropped to $31.8 billion compared to $39.9 billion from June and RFR-linked IRD traded notional declined to $103.4 trillion from $130.9 trillion. Total IRD traded notional fell to $178.7 trillion compared to $235.3 trillion.
The percentage of trading activity in SOFR increased to an all-time high of 71.5% of total USD IRD DV01 in July 2023 compared to 65.0% in June, while CHF and SGD RFR-linked IRD DV01 accounted for 100% of total CHF IRD DV01 and SGD IRD DV01, respectively. As usual, JPY had the highest percentage of RFR-linked IRD DV01 executed as transactions with tenors longer than two years.