Derivatives growth slows during first half, say BIS

Outstanding over-the-counter (OTC) derivatives volumes continued to rise in the first half of 2005, but their rate of growth has slowed, according to figures released today by the Bank for International Settlements in Basel.

The total notional value of outstanding OTC derivatives was $270 trillion, up 7% between December 2004 and June 2005.

The markets saw rapid growth in notional volumes of equity and commodity derivatives, although these still represent a small proportion of total OTC volume. The total outstanding market value of equity derivatives was $5.1 trillion and $7.1 trillion for commodity derivatives.

Interest rate products continued to dominate the OTC market, representing $204 trillion in notional value. The largest category remains euro-denominated products ($76 trillion notional volume), although US dollar products grew sharply to $72 trillion in notional.

The BIS said Mexican peso derivatives have seen impressive development due to growing foreign investment in Mexican bonds. This has sparked a rise in demand for more derivatives products such as cross-currency swaps.

Meanwhile, credit default swap volumes rose 60% to $10.2 trillion during the first six months of the year with most having lifespans of between one and five years.