Japan dealers hail ‘Tona First’ success

Tona overtakes Libor benchmark in yen swaps, but Tibor surge creates new basis risks

A Bank of Japan working group launched Tona First to encourage take-up of its preferred Libor replacement

Japan’s overnight risk-free rate has supplanted Libor to become the primary benchmark for Japanese yen interest rate derivatives, after activity linked to the rate grew more than fivefold in the past three months.

Dealers say the surge was driven by the Tona First initiative, which saw the Bank of Japan-led risk-free rates working group encourage yen interest rate swap liquidity providers to switch the standard quote in the interdealer market to be based on Tona from the end of July. Tona is

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