Shift Away from Ibors Accelerates
Posted by Colin Lambert. Last updated: September 14, 2022
As deadlines near, the shift away from interest rate derivatives that reference Interbank Offered Rates (Ibors) to risk-free rates (RFRs) continues to accelerate with the latest ISDA-Clarus RFR Adoption Indicator breaking the 50% barrier for the first time.
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 six major currencies, hit 51.1% in August from 46.4% in July. On a traded notional basis, the percentage of RFR-linked IRD increased to 44.0% of total IRD transacted in August compared to 39.0% the prior month.
RFR-linked IRD DV01 increased to $16.2 billion from $13.7 billion in July, while total IRD DV01 increased to $31.8 billion from $29.5 billion. RFR-linked IRD traded notional increased to $81.2 trillion from $67.3 trillion, and total IRD traded notional increased to $184.3 trillion compared to $172.8 trillion in July.
The percentage of trading activity in SOFR increased to an all-time high of 57.2% of total USD IRD DV01 in August compared to 51.7% in July, while GBP saw the largest percentage of RFR-linked IRD trading activity, totalling 99.8% of total GBP IRD DV01. JPY had the highest percentage of RFR-linked IRD DV01 executed as transactions with tenors longer than two years.