Articles
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1 week ago |
risk.net | Rebekah Tunstead
Towards the end of last year, the question on many European rates traders' lips was: what is the most effective hedge for euro interest rate swaps? Previously, the answer to the question was the German government bond and its related futures contract. That assumption, however, was challenged after the fixed leg of 10-year euro interest rate swaps started trading below the nominal yield on the German bund for the first time in history in November 2024.
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3 weeks ago |
risk.net | Rebekah Tunstead
Market participants say they are still struggling to navigate the current drafting of Europe's active account rules, with less than six weeks remaining until in-scope firms are required to maintain a derivatives clearing account at a European Union central counterparty. "People are rushing desperately to try and implement stuff where even some of the really basic questions about how you test, how you apply, you don't know the answer," said Andy Jackson, executive director and senior counsel.
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3 weeks ago |
risk.net | Rebekah Tunstead
Markets are pricing in volatility levels that are too cheap given uncertainty around how the US tariff situation will play out over time, according to senior market-makers. Jared Noering, global head of fixed income trading at NatWest Markets, said he believed volatility was underpriced considering the unknowns related to Donald Trump's policies going forward. "I think at this point volatility is probably too low for what is coming," said Noering.
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3 weeks ago |
risk.net | Rebekah Tunstead
The head of the European Commission's unit for macroprudential policy, Emiliano Tornese, has signalled the body is open to the creation of a central bank facility similar to the UK's that can allow non-banks to directly borrow cash against government bond collateral in a stress scenario. European Central Bank and eurozone national central bank liquidity lines are currently only accessible by banks.
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3 weeks ago |
risk.net | Rebekah Tunstead
The deputy secretary-general of the Financial Stability Board (FSB), Martin Moloney, has attempted to alleviate concerns that the international body is targeting a broad reduction in use of leverage by non-bank financial intermediaries (NBFIs) in a recent consultation. Leverage in NBFIs has come under regulatory scrutiny after recent market episodes such as the downfall of Archegos and the 2022 UK liability-driven investment fund crisis.
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The model for calculating initial margin requirements for cleared gilt repo at LCH Ltd is getting revamped https://t.co/KGIk4BchcG
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