Libor webinar playback: spotlight on euros

Panellists from ECB, LCH, Natixis and Societe Generale discuss struggling liquidity in €STR as Eonia nears its demise

Panellists

• Cornelia Holthausen, deputy director general for general market operations, European Central Bank
• Philip Whitehurst, head of service development for rates, LCH
• Jean-Christope Machado, interest rate strategist, Natixis
• Meryeme Souilmi, head of G10 rates derivatives trading for Europe, Societe Generale
• Helen Bartholomew, editor at large, Risk.net

The next 12 months will determine how rates markets cope with the death of Libor.

With transition efforts now entering a critical phase, Risk.net’s editorial team is running a series of quarterly webinars, breaking down the issues facing the market, tracking the progress made and highlighting the remaining questions. 

This quarter’s webinars included a session focusing on the euro market, where the primary interest rate – Euribor – is set to stay. Subscribers can replay the September 23 webinar above. A separate session on sterling markets, broadcast a day earlier, is available here. 

The discussion began with an update on the euro RFR working group’s fallback consultation, then explored struggling liquidity in the new euro short-term rate in the run-up to January 2022, when Eonia will be discontinued. Trading in the new rate has stalled since the Covid-19 pandemic, and a July switch to using €STR for discounting euro swaps at CCPs has yet to spur liquidity. 

Later, the debate turned to forward-looking term rates, which an audience poll deemed vital for building liquidity in the new benchmark. It’s a classic chicken-and-egg problem – the potential liquidity catalyst can only be constructed via a liquid derivatives market. Participants discussed whether the more liquid Eonia market, which trades at a fixed basis to €STR, could be used as an input for building a term RFR.