Tradeweb ICE Constant Maturity Treasury Rates (CMT) Whitepaper
Tradeweb Markets LLC (Tradeweb), a leading global operator of electronic marketplaces for rates, credit, equities and money markets, and ICE Benchmark Administration Limited (IBA), a leading provider of global benchmarks, are introducing the daily Tradeweb ICE Constant Maturity Treasury Rates (the Tradeweb ICE CMT Rates or TWI-CMT Rates).
The Tradeweb ICE CMT Rates have been designed to provide market participants with a daily overview of U.S. Treasury yields for standard maturities, and are based on transactions executed by institutional investors in U.S. Treasuries (and/or quotes provided for U.S. Treasuries) on Tradeweb’s electronic trading platform for U.S. Treasury securities (the Tradeweb Platform). Tradeweb and IBA are providing the Tradeweb ICE CMT Rates to help market participants meet their valuation, risk management and potential benchmarking needs.
The Tradeweb ICE CMT Rates will be based on an interpolated U.S. Treasury yield curve from which standard maturity dates and associated U.S. Treasury yields will be published. The Tradeweb ICE CMT Rates will be published for maturities of 1, 2, 3 and 6 months, and 1, 2, 3, 5, 7, 10, 20 and 30 years, all of which relate to the maturities of frequently issued U.S. Treasury securities.
The Tradeweb ICE CMT Rates will be sourced from a constant maturity yield curve (the Tradeweb ICE CMT Yield Curve) that will be constructed using a curve-smoothing quasi-cubic Hermite spline model. The inputs used to generate the Tradeweb ICE CMT Yield Curve and associated Tradeweb ICE CMT Rates will be based upon volume-weighted average prices, and associated yields, for transactions in on-the-run Treasury securities (i.e. the most recently auctioned U.S. Treasury securities) that took place on the Tradeweb Platform over the course of a 7-hour window between 8:00AM Eastern and 3:00PM Eastern. If there is insufficient trading activity in a particular on-the-run U.S. Treasury security on the Tradeweb Platform, then dealer bid - offer quotes displayed electronically to institutional clients on the Tradeweb Platform sourced between approximately 8:00AM Eastern and 3:00PM Eastern time will be used as input data to build the Tradeweb ICE CMT Yield Curve.
Tradeweb and IBA have conducted an 18-month period of testing on the Tradeweb ICE CMT Rates. The results are set out in the Testing Results section of this paper.
Tradeweb and IBA are now asking market participants and stakeholders to review and provide feedback on the Tradeweb ICE CMT Rates and the proposed calculation methodology by September 18, 2020. Tradeweb and IBA intend to consider and take account of this feedback before finalizing the methodology used to produce the Tradeweb ICE CMT Rates and before launching the rates for use by market participants in financial contracts. The questions that Tradeweb and IBA would like stakeholder feedback on are laid out in the Request for Feedback section of this paper.