SOFR Futures Trading Swells Amid Bets on Fed Rate-Path Shift

Trading in futures tied to the Secured Overnight Financing Rate is picking up, spurred by diverging views on the Federal Reserve’s expected path of rate hikes and last week’s so-called SOFR First initiative meant to shift derivatives trading from Libor to the new benchmark.

Wednesday’s volumes totaled 277,905 contracts, the most since June 18 and well above trading seen over the past two Fed meetings. In fact, SOFR activity as a share of Libor-based eurodollar futures has spiked above 10% over the past two sessions, after averaging just 4.3% since the central bank’s June rate decision.

Three-month SOFR futures ...