In less than half a year,SOFR futures trading volume has broken records again.
On Wednesday,a large trade emerged in the U.S.short-term interest rate market,involving 118,000 contracts,surpassing the historical record of 75,000 trades set in April this year,reaching a new high.
The Chicago Mercantile Exchange (CME) also confirmed that "this is the largest trade for the product to date."
This large trade is linked to the Secured Overnight Financing Rate (SOFR),and its performance is closely related to the recent path of the Federal Reserve's monetary policy.Some analysts have pointed out that this trade may be a bet that the Federal Reserve's easing this year will be less than the current expectations,or investors believe that the trading price of the contract has approached the high point of the year,choosing to take profits and close long positions.
According to swap traders' speculation,the Federal Reserve will cut interest rates by an additional 75 basis points in 2024,higher than the target of an additional 50 basis points announced by policymakers.
It is worth noting that shortly after this large trade was concluded,the SOFR benchmark price for maturity in December 2024 fell rapidly,indicating that this trade may have been initiated by the seller.The two-year U.S.Treasury yield,which has been hovering near the low point of 2022 in recent times,quickly reversed and rose to the intraday high.
As of now,the yield on the two-year U.S.Treasury note is reported at 3.569%.
At the beginning of September,there was a large amount of buying in the market,with prices about 20 points lower than Wednesday's prices.Specifically,the scale of this trade is equivalent to "a risk weight of about $3 million per basis point change." If the trading price rises by 20 basis points,it would be equivalent to a profit of $60 million.
In addition,the preliminary open interest data released by the CME in the early Asian trading session shows that the price of the contract has risen.Analysts believe that this may mean a new position for traders,although the increase is not significant.
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