In the wake of the collapse of several major US banks, including Silicon Valley Bank (SVB), bond futures markets saw increased activity across March 2023, as traders repositioned their bets on higher interest rate moves by the Fed. In response to these events, using BMLL Futures Data, we examine how the trading activity and liquidity of 2, 5 and 10-year T-Note future contracts (outrights) on the CME changed versus 2022.

Trading activity

Firstly, we see a significant spike in traded volumes and order book activity, with both jumping to 2-3 times more than any time during the period examined. The majority of volume growth was in the 10yr note, volumes in the 2yr also saw a significant increase (359%) from a low base. This trend was mirrored when we look at the insert count.



It is notable that whilst spreads remained fairly constant since the start of 2023, the average volume at touch fell by ~20% across the same period. Indicating, there is less liquidity for traders to interact with at touch, even if spreads did not materially widen.



In summary, market events across March 2023 led to a significant increase in order book activity and trading volumes, reducing the passive liquidity participants can interact with, especially at touch. This change in market dynamics is important for best execution - since larger volumes combined with less liquidity at touch means there is less passive liquidity available for participants crossing the spread, likely increasing the cost of trading. Understanding this further will ensure participants achieve better trading performance at times of heightened market volatility.

Insights gained from BMLL Level 3 Data

Understanding market dynamics and the ability to navigate a vast and rapidly changing data set has never been more critical than now. BMLL is the leading, independent provider of harmonised, Level 3 T+1 data to the capital markets. We offer all market participants, including buy and sell-side institutions, flexible access to the most granular order book data and analytics, to enable accelerated research, optimised trading strategies and the ability to generate alpha at unparalleled speed and scale. Level 3 Data from CME, Eurex and ICE is available to all market participants, covering Equity Indices, Fixed Income, Short-Term Interest Rates, Commodities, Digital Assets and FX.

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