What You Need to Know About CNY Swaps

CNY Swaps are the 9th most traded interest rate swap at CCPs. The market is quite standardised, with 90% of volumes in just three tenors. Clearing is split between Shanghai Clearing and LCH SwapClear. 60% of the market is now cleared. When I took a look at trends in 2019 for swaps market data, I […]

ISDA Fallback Spreads – Predicted and Alternative Scenarios

ISDA continues to make progress towards providing more certainty about the way forward for derivatives post LIBOR. This includes the calculation of the ‘fallback spread’ which is to be applied to the preferred fallback compounding methodology to minimize value transfer when the fallback is triggered. The fallback spread is calculated as the 5-year median difference […]

Backtesting of margin models

Given the recent increases in initial margin that I covered in a few recent blogs (see Procyclical margins in the time of Covid-19 and Crashing rates and swap margins), I wanted to look into backtesting of margin models. Background Backtesting is a well established practice, widely used by all CCPs to check the adequacy of […]

$300bn FX Swap Rollover

June sees $295bn of 3 month USD funds provided by central banks expiring. With the Bank of Japan accounting for 50% of the outstanding amounts of these facilities, USDJPY cross currency basis (and FX) will be a focus for these maturing funds. The price differential between the central bank facilities and market-based pricing has shrunk […]

SOFR Futures and Swaps – May 2020

Open Interest in both Futures and Swaps is increasing Record volumes in recent months Volumes by CCP or SEF Basis and OIS Swap products Clarus Data Products provide insights Monthly Volumes in 2020 In CCPView we can view both volume and open interest by month. CME ETD with $5.2 trillion of Futures volume in Mar-20, […]

Procyclical margins in the time of Covid-19

I recently read an interesting BIS Bulletin, titled “The CCP-Bank nexus in the time of Covid-19”, by Wenqian Huang and Elod Takis (available here), with the following key takeaways: The specific part I am going to focus on today is the third bullet point, “higher margins should be expected but the extent of procyclicality or […]

Are USD Rates About to Go Negative?

Over $95bn in Fed Funds swaps have traded at negative rates. The lowest recorded rate so far was close to minus 7 basis points. Swaps all the way out to 3 year maturities have traded in negative territory. When does the market expect negative rates and how large will the cut be? A GIFT! On […]

Cross Currency Swap conventions in an RFR world

In January 2020, the ARRC published the final recommendations for cross-currency swap conventions. It should be noted that the recommendations are primarily directed towards dealer-dealer trades and the publication points out that dealer-end user trades may require different structures. I have commented previously on potential options in AUD markets and more generally for other currencies. […]

Swaps Data: Record Trading Volumes in March

My monthly Swaps Review looks at cleared volumes in the most recent 3-month, covering Volumes Feb-Apr 2020 compared to Feb-Apr 2019 Interest Rate Swaps in USD, EUR, JPY Credit Default Swaps FX Derivatives (NDF, FXO) CDS was the standout with almost twice the monthly volume in March 2020, while USD IRS and NDF both achieved […]