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Inside the week that shook the US Treasury market
Rates traders on the “scary” moves that almost broke the world’s safest and most liquid investment
European Commission changes its tune on proposed FRTB multiplier
Banks fear departure from original diversification factor undermines case for permanent relief
JP Morgan’s equity and commodity VAR soar to five-year highs
Trading risk gauges jump 150% and 190% amid Q1 trading flurry
Risk data
Why AI will never predict financial markets
Laws that govern swings in asset prices are beyond statistical grasp of machine learning technology, argues academic Daniel Bloch
Supervisors should be mindful of geopolitical risks, says IMF
Shock events cause sizeable swings in asset pricing, institution’s latest report highlights
Here’s what investors said about trade wars in January
A global trade war ranked third and a stock market crash fourth in Risk.net’s list of top investment risks, earlier this year. Some described how US tariffs would lead to “bimodal” outcomes – slowing growth on one hand, but with the chance of positive effects if targeted countries capitulated. Participants also worried about stock market panic in the face of new risks. “Investor confidence is going to evaporate,” predicted one.
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Market turmoil
The end of the world, or an artificial crisis?
Bimodal tariff threat leaves investors grappling with uncertainty
Trump tariffs turn swap spreads into ‘pain trade’
Hedge funds bet big on Treasuries to outperform swaps. The opposite happened.
FX liquidity ‘worse than Covid’ amid tariff volatility, dealers say
Available liquidity for single clips dropped to as low as $20 million ahead of tariff pause
Tariff turbulence piles pressure on banks’ VAR models
Backtesting breaches start to mount, but too early to tell if regulatory intervention needed
Risk Quantum
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Risk Quantum tracks thousands of data points across hundreds of metrics from organisations that represent a cross-section of the financial system. Published daily, articles are short and broken into chunks – the facts, the context and a brief commentary – and use data visualisations to get each story across.
JP Morgan’s equity and commodity VAR soar to five-year highs
Trading risk gauges jump 150% and 190% amid Q1 trading flurry
Counterparty Radar
Matchmaking and benchmarking for OTC derivatives
Counterparty Radar is based on position data from around 20,000 US mutual funds and ETFs, rolled up to the manager level – it shows the OTC derivatives they have on their books, and who they traded them with, providing unique insights into an important market segment. More info
BlackRock bucks trend in shrinking IRS market for Ucits
Counterparty Radar: Pimco boosts pay-fixed book by $27.5 billion in H1 2024
Bank regulation
Can Europe’s FRTB refurb bring banks back to Club IMA?
Softening the NMRF regime permanently might have the most impact, but the output floor still hurts
Trading desks want regulators to face down the NMRF monster
Rule-makers in Australia and the European Union are open to changes to the unpopular FRTB test
FRTB may bite harder for Europe’s CVA modellers
Farther reach of advanced approach and lighter load on total requirements mean limited takeaways from Canada and Japan’s implementation
UBS takes standardised approach for FRTB – for now
Swiss bank is one of the largest to drop internal models; sources say it could switch later
For US Treasury algos, dealers get with the program
Four banks now offer execution algos on Bloomberg, with plans to go further, faster
Clearing
Ice eyes year-end launch for Treasury clearing service
Third entrant expects Q2 comment period for new access models that address ‘done-away’ accounting hurdle
No need for repo clearing ‘cannon’ in Europe, says industry
Observers question rationale for a clearing mandate, calling for clearer incentives
NSCC liquidity shortfalls raise T+1 concerns
Lagging FX settlement processes could become a problem for clearing houses
Basis traders mull UST self-clearing as response to SEC mandate
Inter-affiliate exemption requested by hedge funds could ease shortage of clearing capacity
Op risk benchmarking
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