
Dollar/yen basis blows out as leverage ratio bites US banks
Widening in the dollar/yen cross-currency basis is being blamed on regulation such as the Basel III leverage ratio which is decreasing the appetite of foreign banks to provide liquidity for cross-currency swaps

Dealers are blaming the impact of the Basel III leverage ratio for the recent 50% widening in the dollar/yen cross-currency basis as a shortage of market-makers causes a supply and demand imbalance in the cross-currency swap market.
Japan banks have massively expanded their foreign asset holdings in recent years as they look overseas in search of yield pick-up: according to Barclays, the amount of foreign currency loans outstanding – the majority of which are US dollar – has doubled from less
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Markets
J.P. Morgan Inverse VIX Futures ETN: a more intuitive approach to risk
J.P. Morgan’s new inverse Vix futures ETN, designed for a more stable risk profile
ALM desks await rebound after euro swap spread hit
Bank treasury desks still feeling pain on bond and asset swap positions that saw big losses last year
Inside the company that helped build China’s equity options market
Fintech firm Bachelier Technology on the challenges of creating a trading platform for China’s unique OTC derivatives market
Asia hours surge complicates FX options market-making
Late tariff announcements in US trigger hedging headaches during less-liquid Asia sessions
Buyout industry nervous as insurers choose gilts
Some bulk annuity providers are pricing deals assuming returns they ‘can’t achieve’ today
Automated market-making tested by intraday FX vol
Price gaps in spot FX markets could be exacerbated by algos trading on headline risk
Basel tweak may weaken counterparty hedging, industry warns
Proposed technical revision risks dissuading bespoke CDSs and guarantees covering derivatives exposures
Quants should take care with synthetic data – Lehalle
Synthetic data creates an illusion of certainty and risks messing up portfolio construction, says quant