Slow €STR swap take-up threatens term rate fallbacks

Esma’s Maijoor calls for greater use of new benchmark to help develop forward-looking rates

European regulators have called on the market to start trading swaps that directly reference the euro short-term rate (€STR) instead of Eonia, amid concerns that a lack of liquidity in the new benchmark’s swaps market is holding back development of forward-looking term rates that could serve as fallbacks to Euribor contracts.

European Union rules require market participants to insert fallback language into Euribor-linked contracts that allow them to move onto alternative benchmarks should the