Cross Currency Swap Review 2020

I was fortunate enough to be able to write about Cross Currency Swaps a few times during 2020. At the height of the market turmoil in March and into April, I wrote about: Cross Currency Swaps Trading During a Crisis Mechanics of Central Bank FX Swap Lines Central Bank Responses to COVID-19: FX Swap Arrangements […]

Spreadovers vs SOFR

LIBOR swaps traded on spread to US Treasury bonds make up about 70% of interdealer liquidity. The floating leg of these swaps is about to be discounted at SOFR. This could lead the Spreadover market to start trading versus the SOFR index itself. We look at the differences between a LIBOR spreadover and a SOFR […]

US Treasury Quarterly Refunding: Traded Volume Data

Clarus data for August 2020 shows a big increase in 30Y traded volumes in Rates products. This was specifically in USTs and exchange traded derivatives. Long-dated OTC derivatives did not see the same increase. The 20Y and 30Y US Treasury auctions, as part of the quarterly refunding cycle, were clear drivers of this volume. However, […]

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 […]

USD Swap Markets during COVID-19 Pandemic

Statistical measures show that USD swaps liquidity has deteriorated in the past six weeks. Specifically, price dispersion of 10Y USD swaps has tripled since early February. This is consistent with anecdotal stories in the press. However, we are still seeing higher than typical volumes transacted. Trading may be more difficult, but we are not seeing […]

Cross Currency Swaps Trading During a Crisis

Cross Currency Swaps trading fundamentally changes during a funding crisis. I run through the impacts to the risks that are being managed and the daily flow of news that drives trading activity. There are various drivers ranging from FX markets, LIBOR fixings, futures convergence trades, central bank operations and client demand. Most traders will only […]

Is Transparency Helping Markets Function?

Trading has continued uninterrupted across the markets that we monitor, despite the extreme levels of volatility we have seen over the past week. Transparency data shows that Rates, Credit and even Funding markets continue to function “normally” in terms of volumes transacted. Crucially, markets have not “seized up” during some crazy price moves. Market participants […]

Will GBP LIBOR stop trading on 2nd March 2020?

The market convention for GBP Swaps is expected to move to SONIA from Monday March 2nd 2020. This structural change follows an announcement from UK regulators. The data shows that already 88% of total notional in GBP swaps is versus SONIA. Maturities longer than 2 years have still not transitioned to SONIA trading. Probably* as […]