Pimco triples book as IR swaptions market nearly doubles

Counterparty Radar: Goldman Sachs nets almost all of bond giant’s Q4 growth

US mutual funds added roughly $90 billion to their interest rate swaptions positions in the fourth quarter of 2021, with Pimco alone accounting for $75.4 billion of those transactions.

The bond behemoth already dominated the market, but thanks to this massive bet its market share grew to 51% of the total from 28% in Q3. Overall, the swaptions space grew by two thirds, reaching a combined $225 billion in notionals, the highest recorded over the past two years for which Risk.net has data.

Goldman Sachs was the main beneficiary of the expansion as it won 96% of Pimco’s new business. This propelled Goldman to the top spot of dealers, pushing Morgan Stanley to second place, despite adding $3.6 billion to its book.

Citi suffered the largest contraction over the quarter at $2.3 billion, dropping from second to fourth place. Deutsche Bank recorded the second-largest loss of business – $1.1 billion – and slid from sixth to eighth place.

About $85 billion of new transactions went to swaps referencing the USD Libor rate, bringing their total volume to $199 billion. Only $2.8 billion went to trades referencing the secured overnight financing rate, or SOFR, which made its debut in filings in Q4.

Putnam Investments led the charge in SOFR adoption, booking $1.3 billion in volume. The asset manager also added $7.2 billion referencing USD Libor.

JP Morgan was Putnam’s main partner-in-crime for USD Libor trades, while Bank of America and Citi were counterparties for SOFR swaptions.

Apart from its gains with Pimco, Goldman took home three quarters of Macquarie Asset Management’s business and wrestled Wilshire Associates’ entire book away from Morgan Stanley. Morgan Stanley also lost over 50% of Western Asset Management’s transaction volume and half of Alliance Bernstein’s.

The data is compiled from disclosures made to the US Securities and Exchange Commission that have been gathered and analysed by Risk.net’s Counterparty Radar service. Filings reflecting fund positions between October 1 and December 31, 2021 were aggregated for the first time to create the fourth-quarter rankings. The methodology is further described below (see box: About this data).

 

About this data

The information used in this analysis comes from Nport-P filings to the US Securities and Exchange Commission. This is a relatively new form, introduced at the end of 2019, which requires mutual funds and exchange-traded funds to file monthly summaries of their portfolio holdings to the SEC. 

The filings include over-the-counter derivatives trades that were live at the time of the filing, and show details such as bank counterparty names, currencies, trade sizes and remaining maturity. The forms are filed to the SEC on a monthly basis, and the regulator makes the final filing of each fund’s quarter public 60 days after the end of that period. The filings are in a structured XML form, making it possible to download and parse the data for trends. 

It’s important to caveat the information. While these are pro forma regulatory filings to the SEC and should be accurate, mistakes and miscategorisations do occur. The data was cleaned and obvious errors excluded.

As the database is updated and improved periodically, data presented may not mirror information published in previous stories. Each story reflects the most accurate representation of data at the time of publication.

Information from these filings is also the basis for a new tool, Counterparty Radar, which allows users to search the filings information themselves to discover the most popular dealers and most active managers for a range of OTC derivatives. We will track these stats every quarter, so please get in touch if something doesn’t look right, or to suggest other ways to present the data: [e-mail]