ASX Rates Highlights Q3 – July to September 2023
OTC, Futures and Benchmarks insights – Q3 2023
ASX provides key trading observations during the period July to September 2023 and the latest rate derivative market updates. View the key updates and the full chart pack below.
Average top of book volume increases in 90 Day Bank Bill Futures (IR) contracts in both the day and night sessions while the RBA continues to hold the target cash rate.
Rates 'higher for longer' theme persists while average top of book volume rises in the 10 Year Bond Futures (XT) contracts. XT yields rise 50 basis points in September, driven primarily by movements in the US 10-year Treasury yield.
ASX Benchmarks commenced publication of an overnight GC1 repo reference rate, providing greater transparency into where repo is trading to the broader market. The Beta version of the rate is available to view on asx.com.au. To see the rates, underlying volume and to view the proposed methodology go to Benchmark data (asx.com.au).
During September, ASX held its third OTC Multilateral Compression Cycle via TriOptima (part of OSTTRA) with customers, helping to reduce global capital costs and operational risk for ASX OTC Participants.
ASX OTC Clearing volumes for Q3 2023 were A$1.208trn notional value, following a reduction in global Overnight Index Swap clearing during the quarter. Open Interest was A$3.55trn down vs PCP as maturing Overnight Index Swaps were not replaced at the same pace and following the OTC Multilateral Compression cycle that was held in September 2023.
During the quarter, market participants took advantage of the lower total cost of clearing available at ASX, with 16% growth in OTC Clearing activity of interest rate swaps with a 3 year+ term to maturity vs PCP contributing to an average 55% reduction in Initial Margin requirements through usage of ASX's fully automated cross-product margin optimisation service.
ASX Collateral balances are returning post COVID to a high of $23b in Q3 2022 whilst maintaining 30% of RBA OMO market share.
Triparty customers continue to realise the benefits from automation, scale and efficiency, and flexibility gained from the allocation of collateral with the average repo contract having 102 unique securities allocated as collateral and 63% of the securities allocated having a value of less than $5,000,000.
The utilisation of structured securities and corporate bonds as eligible collateral has reached a 16% with use of government bonds has steadily decreased as collateral, reaching 30%.
RBA’s open market operations has seen some stability relative to the highs during the COVID-19 averaging $11bn during Q3 2023, with excess ES balances falling.
On Monday 3 October, Marex Australia were admitted as an ASX 24 Trading and ASX Clear (Futures) Participant. One of the key markets that ASX is proud to be innovating in is the carbon market as we prepare to launch gas and carbon futures in 2024. Marex will be an important clearer for these new products.
The full chart pack includes ASX Interest Rate Derivatives volumes pcp, roll volumes, volume vs open interest pcp, 90 Day Bank Bill Futures, 3 and 10 Year Bond Futures top of book volume and OTC activity.
The futures market manages the transfer of exposure from the spot to the next contract on a quarterly basis. ASX facilitates this process by providing calendar spreads; an efficient and economic way to roll exposure. Learn how the process works.
ASX intends to launch a suite of Carbon Futures products on the ASX 24 Market in 2024 to support Australia and New Zealand’s decarbonisation efforts and energy transition toward net zero. Carbon Futures will provide a transparent forward curve for the market to hedge and price the renewable energy transition.
Email: Rates@asx.com.au
www.asx.com.au/bond-derivatives
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