Tuesday, 15 March 2022

USD Benchmark transition: LIBOR-SOFR criss-cross continues

LIBOR fight not over: LIBOR retakes the lead in front of SOFR at LCH.

Two weeks ago, SOFR overtook LIBOR in volume terms at LCH for the first time. Last week, LIBOR took back the lead by a wide margin — 38.2% for LIBOR versus 27.7% for SOFR. Similar trend is visible in the ISDA/US regulatory figures where LIBOR is almost the double of SOFR in volume terms (1,874 bn v 952 bn).

Figure 1: Weekly share of product types at LCH

Figure 2: SOFR volume evolution and share among tenors.

In terms of outstanding amounts, the LIBOR instruments are almost unchanged. No real LIBOR risk reduction visible at this stage.

On the futures side, LIBOR remains firmly in the lead, even if that lead has been eroded.

Figure 3: Volume in some STIR ETD futures at CME since October 2021 (in thousands of contracts).