RFR Adoption Resumes Uptrend
Posted by Colin Lambert. Last updated: December 14, 2022
After a choppy four months in which the pace of growth in adoption of risk-free rates (RFRs) flattened out, the uptrend appears to be back underway.
The latest ISDA-Clarus RFR Adoption Indicator for November came in at 51.4%, the second successive monthly growth and up from October’s 51.3%. 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 RFRs in six major currencies.
On a traded notional basis, the percentage of RFR-linked IRD increased to 48.3% of total IRD transacted in November 2022 compared to 45.4% the prior month.
RFR-linked IRD DV01 grew to $15.9 billion from $15.7 billion in October, while total IRD DV01 increased to $31.0 billion from $30.7 billion. RFR-linked IRD traded notional rose to $87.8 trillion from $79.7 trillion, and total IRD traded notional increased to $181.7 trillion compared to $175.6 trillion the prior month.
The percentage of trading activity in SOFR increased to an all-time high of 58.3% of total USD IRD DV01 in November 2022 compared to 58.1% in October, while CHF and GBP saw the largest percentage of RFR-linked IRD trading activity, totalling 100% of total CHF IRD DV01 and 99.9% of total GBP IRD DV01, respectively. JPY had the highest percentage of RFR-linked IRD DV01 executed as transactions with tenors longer than two years.