According to this data from the Bank for International Settlements, total notional value of OTC derivatives was $683.7 trillion with market value of $20.4 trillion as of June '08. About two thirds of this is interest rate swaps, dwarfing the CDS market ($57.3T notional / $3.2T market value). Seems to me that since the Fed & Treasury is jumping through hoops to support the CDSs, they are at the very least aware of what interest rate policy will do to the $458T in interest rate swaps. Could these contracts (and the implications of cascading defaults) be dictating rate policy?

Having very limited knowledge on the subject, I'm wondering who here can comment on this. Also, are there any data on where the OTC derivatives markets stand now compared to June? Thanks.