ASX Rates Highlights Q4 – October to December 2023
OTC, Futures, Benchmarks and Collateral insights Q4 2023
ASX provide key trading observations during the period October to December 2023 and the latest rate derivative market updates. View the key updates and the full chart pack below.
2023 marked a record year in 90 Day Bank Accepted Bills Futures volumes on ASX 24 due to higher rates and short-term interest rate hedging and speculation. Further, its proportion of ASX 24 Rates Futures volumes has continued to increase on a quarterly basis since Q2 2020. As of the end of 2023, Bills Futures makes up 25% of ASX 24 Rates Futures volume, rising from less than 10% in 2020.
Q4 2023 was the highest quarter in ASX 24 Rates Futures volumes since the beginning of the COVID-19 pandemic (Q1 2020). Moreover, open interest has increased across the ASX 24 Rates product suite over 2023 on a month-end basis, largely driven by increased open interest across the front-end contracts. We continue to see consistent growth in ASX 24 Rates Futures volume on a quarterly basis since 2020.
In early Q4 2023, the BBSW yield curve shifted higher as the market continued to price in further rate hikes. Coming into 2024, the yield curve has flattened as longer dated tenors are repricing lower, adjusting to forward rate expectations driven by softer inflation data.
Trading volumes returned to the short-end contracts with 30 Day Interbank Cash Rate (IB) futures doubling the monthly averages seen in 2022 with 2.4m contracts traded in 2023. Open Interest also increased steadily through 2023 to end the year at 149k contracts. Meanwhile the 90 Day Bank Accepted Bills (IR) futures saw record volumes in 2023 (34.7m traded in total) with RBA Monetary Policy changes (the OCR was increased at 5 out of 11 Monetary Policy meetings) driving activity. Open interest was up 51% year on year at 1.15m contracts at the end of 2023.
Activity in Treasury Bond futures was steady with geo-political events driving interest across the curve. The 3 (YT) and 10 (XT) Bond futures were up 27% and 17% year on year, respectively. Open interest increased slightly in the YT to 693k contracts and up to 1.04m contracts in the XT. The 5 (VT) Bond futures saw subdued trading activity during 2023 (down by one-third on the previous year in terms of volume traded) however the VT did see an increase in open interest ending the year up 24% to 25k contracts following renewed activity in Q4 2023.
ASX OTC Clearing volumes for Q4 2023 were A$1.203trn notional value in line with PCP. Open Interest was A$3.2trn down vs PCP as maturing Overnight Index Swaps were not replaced at the same pace.
During the quarter, banks and clients took advantage of the lower total cost of clearing available at ASX, with activity of interest rate swaps with a 3 year+ term to maturity, up 10% vs Q3 2023 and up 30% vs PCP (Q4 2022). This contributed to an average 55% reduction in Initial Margin requirements through usage of ASX's fully automated cross-product margin optimisation service.
During December 2023, ASX completed a market consultation process on EFP and Block trade reporting procedures with a focus on providing market participants with additional flexibility (ahead of any technical changes to the ASX TradeAccept platform to improve reporting operational and technical processes).
ASX received several submissions to this consultation, and subject to regulatory clearance, is intending to take forward a number of changes including some additional changes proposed by participants.
During February, ASX will publish a response to consultation to market participants to outline the procedure changes, intending to make them effective by April 2024 subject to regulatory clearance.
At the end of 2023, ASX Collateral balances have held steady at A$19bn (refer to full chart pack) with market share of RBA OMO finishing at 37%.
ASX Collateral participants are continuing to experience the benefits of an efficient collateral optimisation solution with the average repo contract optimised with 435 unique securities and 64% having a value below A$5m. Further, structured securities and corporate bonds make up 18% of eligible collateral with government bonds' usage decreasing to 28%.
RBA’s OMO has seen some stability relative to the highs during the COVID-19 averaging A$11bn during Q4 2023, with excess ES balances expected to continue to fall with the unwinding of the TFF through to mid 2024.
The full chart pack includes ASX Interest Rate Derivatives volume by session, roll volume, volume vs open interest, calendar year overview, OTC activity and ASX Collateral balances.
ASX look forward to attending FIA's International Futures Industry Conference at Boca. Connecting with the futures community to discuss trends and the transformation of cleared derivatives.
ASX's ongoing partnership to support the DCM Summit in Sydney is a valued annual sponsorship. As the pinnacle event in the Australian debt capital market calendar, bringing together views from issuers, investors and intermediaries.
Email: Rates@asx.com.au
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International: telephone +61 2 9338 0000
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