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Under pressure

Sporadic bursts of trading activity have tested the depth of liquidity in the US interest rate swaps market in recent months. Now, large hedging flows and rising structured credit-related risk are having a tangible influence on market dynamics

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Life has been pretty tricky for traders in the US interest rate swaps market in recent weeks. Large mortgage-related hedging flows, dealer hedging of constant maturity swap (CMS) spread-linked structures, systemic risk fears and the apparent repercussions of a dramatic fall in pricing among certain structured credit indexes have, at times, put the market under some stress.

Swap spreads have moved

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