Interest rates
Market knee-jerks keep VAR models on their toes
With a return to volatility, increased backtesting exceptions show banks’ algos are stretched
US banks’ unrealised losses surge by $33bn in Q4
Led by JPM, Wells Fargo and Capital One, every major bank reported higher losses in AOCI, in reversal of previous quarter’s recovery
Clients’ share of IRS clearing margin hit record high
Data from CME, Eurex and LCH shows clearing members’ house IM fell in January, pushing client proportion to 67.7%
Hong Kong dealers make Honia transition push
Standard Chartered ramps up swaps quoting for Hibor alternative; calls for industry transition group
Legal battle over Italian swaps drags on, frustrating dealers
Despite banks claiming victory in London over disputed interest rate swaps, parallel Italian proceedings could delay payouts
JP Morgan logs two VAR breaches as trading revenue slumps
Largest trading loss in Q4 reached 262% of the bank’s VAR limit, matching a breach reported at the height of the Covid-19 pandemic
Japanese banks’ bond strategies diverge amid interest rate shifts
MUFG increases JGB portfolio duration to four-year high, while SMFG and SMTG take opposite bet
Corporates turn to structured notes to juice cash returns
Dual currency notes find favour with treasurers under pressure to boost yields amid higher rates
First Citizens doubled pay-fixed interest rate swap book in Q4
Rejig of hedging instruments hints at higher-for-longer rate assumption
Corporates eye complex FX hedges as carry costs mount
Leveraged forwards and options-based structures entice treasurers facing rates uncertainty and FX volatility
EU bond funds’ debt securities see largest increase since pandemic
Holdings up €102 billion in November, driven by funds in Luxembourg, Ireland and France
Regions Bank swells HTM book to curb AOCI volatility
In strategic shift, bank aims to bolster HTM holdings to 25% of securities portfolio
SG looks beyond equity derivatives in new markets push
French bank aims to expand fixed income business to achieve “more stable” revenues across asset mix
HKMA’s renminbi repo plans boost hopes for onshore access
Market participants optimistic that new provisions for offshore repos of onshore bonds is first step towards mainland access
Euro swap spread volatility challenges Bund’s hedging role
German Bunds face scrutiny as euro swap spreads turn negative, forcing traders to rethink hedging strategies
UBS sterling rates head departs
Ian Hale left the Swiss bank in December
Funding arbitrages and optimal funding policy
Stochastic control can be used to manage a bank’s net asset income
Initial margin requirements hit record highs at major CCPs
Tumultuous third quarter sees $94bn surge across 14 CCPs
Ice’s AFX swoop shines spotlight on Ameribor prospects
CEO John Shay steps down after exchange group buys firm for mortgage and index synergies
Lenders scramble to get ahead of Italian fallback mandate
New law requiring robust fallbacks for Euribor will take effect on January 10
Margin breaches skyrocket at JSCC amid market volatility
August turmoil led to record initial margin shortfalls at six clearing divisions