More Red-Strip Rolls, LIBOR Transition Risk Mitigation?

Heavy volume centered in Eurodollar Reds (EDZ1-EDU2) centered around spreads most likely due to LIBOR transition to the Secured Overnight Financing Rate (SOFR) positioning and risk mitigation.

• Over 114,000 Red Dec'21/Mar'22 spds trade so far, mostly from +0.060 to 0.040 with better sellers reported. Red Mar'22 volume leads with over 435k traded so far, Red Dec'21 second highest with 244k. Various additional spds reported include EDH2 vs. EDM2 and EDU2.
• Expect volume pick-up to continue as myriad entities that use Eurodollar futures (real$, bank & insurance portfolios, global macro, etc) start to adjust to retirement of LIBOR benchmark at end of 2021, particularly 3M of which Eurodollar futures are based on.
• Transition from the traditional LIBOR benchmark to SOFR has been relatively slow, partially due liquidity and fallback provisions costs. Should see pace pick up as 2021 proceeds.