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Callable repack frenzy opens up new options market in Europe
Demand driven mainly by French life insurers looking for alternatives to low-yielding sovereign bonds
Buy-side physical FX clearing at LCH faces scepticism
Lack of clearing mandate and settlement wrangles mean demand for putative service remains weak
SOFR adoption stalls after US Libor delay
Stay of execution, RFR illiquidity and fallback reliance slow SOFR adoption
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Quotes
There isn’t anything that really constrains them [the US Financial Stability Oversight Council] from going back to a focus on systemically important non-bank institutions and… the transmission channels
Marc Saidenberg, EY
There’s really no downside to scenario analysis unless it causes you to do something that harms you, and that’s pretty rare
Aaron Brown, formerly of AQR
When you look at the volume on the private bank business [in autocalls] it is a multiple compared to last year. It’s a very, very big shift for investors
Cross-asset sales head at a US bank in Hong Kong
Editor's Choice
Brexit drives swaps trading to US platforms
Lack of equivalence forces dealers to shift euro and sterling swaps out of European and UK venues
Big Figure
Margin mayhem
Insurers and pension providers in the eurozone likely exacerbated the run on the region’s money market funds (MMFs) in March, as they withdrew cash en masse to cover huge margin calls on derivatives triggered by Covid-induced volatility. Researchers at the European Central Bank found a strong correlation between MMF inflows and outflows and the variation margin payments made to and from insurance corporations and pension funds related to their interest rate and currency derivatives.
Read the full articleDerivatives
Callable repack frenzy opens up new options market in Europe
Demand driven mainly by French life insurers looking for alternatives to low-yielding sovereign bonds
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Comment
Repair the leverage ratio, revive the repo market
Union beckons for the three quant tribes
Our Take
A European watchdog with more bark than bite
March’s clearing failures give new life to an old idea