US Election Live – What is Trading?

Chris Barnes

15 hours ago

We will follow what is trading in Interest Rate Derivatives markets across the election, with the latest post at the top of the blog.
As a reminder, we have seen record volumes trading in Swap markets so far this year.
Our 2016 blog suggests that trading was 5x more active on Election Day than average.
10Y and 30Y outrights, 5Y spreadovers and 5Y-30Y curve trades were the most active back in 2016.

15:30h London (5th November)

As we set up for tomorrow’s trading activity, we are seeing unusually large amounts of activity in 10Y15Y30Y Butterfly so far today;

Showing;

We’ve had 13 trades totalling nearly $500k DV01 in 10Y15Y30Y already today.
The prices vary because not all of these are spot-starting flies. The range of spot trades is very tight, 22.25-22.375bp (i.e. 1/8th of a bp).
10Y12Y15Y is also unusually active.

We will update this blog with what is unusually active, and track price moves accordingly. Stay tuned!

11am London (5th November)

Ahead of the results (and any contests to the results), we would be well served to remind ourselves of the set-up going into the election itself. So, here is a quick reminder of trading conditions in USD swaps during 2024:

In terms of volumes traded, 2024 has been a record year in USD swaps;

Average Daily Volumes of cleared USD swaps in $m equivalents.

I’ve looked at these volumes in more detail in September’s blog “USD Rates – What’s New” and October’s blog “RFR Adoption Q3 2024” covers the DV01. It is also worth noting that these record volumes are not USD specific – EUR Rates are also trading in record volumes, as shown in last week’s blog “EUR Rates – What’s New“.

Despite banks best efforts to compress everything away (with a particular eye on their upcoming end of year GSIB scores….), this means that we head into the election with Open Interest in USD swaps at an all time high above $86Trn:

Open Interest in $m of cleared USD Swaps

Open Interest is a pretty good measure of the risk at a CCP, but it is not perfect. It is, however, more timely than the Initial Margin disclosures we have, that suggest over $300bn was tied up in Initial Margin related to Swaps as at 28th June 2024.