Fed Rate Hike Probability Pushes CME Interest Rate Trading to Record

Markets have rushed to price in a Fed rate hike culminating in record volumes across key futures segments.

CME Group, one of the industry’s largest derivatives marketplace, recently recorded an all time record high volume of Fed Fund Futures contracts on February 22, 2017, shattering a previous high established on November 9, 2016, which followed immediately after the US presidential election.

Last week, CME Group saw its Fed Fund Futures contracts swell to a fresh high of 658,700 contracts. In addition, on the same day, its Ultra 10-Year Treasury Futures also scored a new milestone with a record high of 315,730 contracts traded, having surpassed a previous high on November 28, 2016.

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Overall, both contracts managed to again set record open interest on February 22, 2017 of 1.6 million and 342,000 contracts, respectively. The swell in volumes too place ahead of a US Federal Reserve meeting of officials, which ultimately yielded a hawkish stance.

Consequently, traders have since rushed to price a March 2017 rate hike – the implied probability on the futures market is currently pricing in an 80 percent chance of a hike by the Fed at its next meeting on March 15th.

Agha Mirza

According to Agha Mirza, CME Group’s Global Head of Interest Rate Products, in a statement on the record volumes: “CME Group continues to be the destination of choice for U.S. interest rate risk management across the yield curve. As these records demonstrate, market participants around the world are using our deep, liquid interest rate products to navigate increased market volatility and geopolitical uncertainty.”

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