JPY Swaps
Background: Japan is taking a multiple rate approach. DTIBOR is expected to continue alongside TONA. ZTIBOR is planned to be discontinued 2 years after LIBOR cessation. JPY-LIBOR will cease publication on 31st December, 2021.
TONA has continued its rise, now >70% of JPY swaps executed in November, from 60% in September, up some fifteenfold from 4.5% in June.
CHF Swaps
Background: CHF-LIBOR will cease publication on 31st December, 2021.
SARON has had a significant uptick to almost 80% of CHF swaps executed in November, up from 64% in September, almost trebling from less than 30% in June.
CAD Swaps
Background: Canada is taking a multiple rate approach. Reformed/enhanced CORRA will continue alongside CDOR.
There has been little change with CORRA continuing to make up less than 5% of CAD swaps executed in most months.
AUD Swaps
Background: Australia is taking a multiple rate approach. The reformed BBSW is expected to continue alongside AONIA.
Activity in AONIA has been very subdued over the last 12 months but suddenly increased to 5% of AUD swaps executed in September, October and November, up from 1% in June.
SGD Swaps
Background: Singapore initially took a multiple rate approach. However, the reform of SIBOR to base it more on transaction data failed and will cease in 2024. SOR is expected to be replaced by SORA.
Activity in SORA had been very subdued over the last 12 months but having suddenly increased to over 70% of SGD swaps executed in September, it was over 90% in October and November. This was just 15% in June and less than 5% in May…
Conclusion
The FCA and most other regulators are clear, LIBOR and many other IBORs will become extinct in the global swaps market. Progress on adoption of new RFRs has certainly been made, particularly in; SGD (SORA) [>90%], GBP (SONIA) [>80%], CHF (SARON) [~80%], JPY (TONA) [>70%] of new trades are traded on the new RFRs. There is clearly still a way to go to see the new RFRs completely replace the IBORs in global swaps trading.
There has even been progress in:
- SOFR now >25% of USD swaps, driven by the SOFR first initiative
- EuroSTR now 15% of EUR swaps, as firms stopped trading EONIA
What’s next?
With more significant milestone dates approaching we expect to see further shifts in the OTC interest rates swaps landscape. We will be back in 2022…
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