LCH-JSCC basis turns negative on BoJ policy shift

Changes in hedge fund positioning at LCH seen as driver of inversion on 20-year swaps

The BoJ and the CCP basis montage

A pricing gap between long-dated yen interest rate swaps cleared at Japan Securities Clearing Corporation and the same instruments cleared at LCH plunged into negative territory at the end of 2023, with the basis jumping fivefold in December alone. 

On December 28, the rate on 20-year pay-fixed yen swaps cleared at LCH was 4.625 basis points lower than the same contracts cleared at JSCC. Just four months earlier, instruments cleared in London had been 2.375bp higher than their Tokyo-bound

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