Rate-linked notes trigger ‘pain trade’ for dealers
Negative 2y30y US swap spread sees hedging costs for range accruals soar, fuelling more flattening
The inversion of the US dollar swap curve between the two-year and 30-year points in recent weeks has led to losses for some banks’ exotics desks, as dealers struggled to re-hedge their exposure to structured products known as range accrual notes.
The 2y30y constant maturity swap (CMS) spread was around 190 basis points a year ago, but a steady flattening this year saw it turn negative at the end of March, bottoming out at -39.4bp on April 5. A second inversion took place on April 19, and it
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.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
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. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Markets
Robinhood buys Marex FCM as futures entry takes shape
Retail broking giant follows WeBull into futures market
Deutsche Börse building equities dark pool
Move comes hot on heels of Euronext launching its own dark pool
European funds face upsurge in settlement risk after T+1
Trade body Efama finds up to 40% of daily FX flows may have to settle outside protection of CLS
Energy credit optimisers vie to become headline act
Competing initiatives may dilute ‘network effect’ as race to fill void left by TP Icap intensifies
Traders eye negative CDS-bond basis
Changed market dynamic can be profitable for those firms able to capture it
Reluctantly, CME moves to clear US Treasuries
CME Group will seek regulatory approval to clear US Treasuries, chief executive Terry Duffy said today
JP Morgan leads US banks’ FX trading revenues
Only two dealers saw revenue growth through 2023 as Goldman Sachs reports 75% drop
Singapore Exchange to return to short-term rates market
SGX president Syn hails new Sora and Tona futures as the “missing chunk of the rates complex”
Most read
- Quants are using language models to map what causes what
- Reluctantly, CME moves to clear US Treasuries
- The bank quant who wants to stop gen AI hallucinating