Derivs - Credit

For market participants who expect euro rate volatility to remain suppressed, JPMorgan is recommending a long-gamma bias strategy in buying 3mx5y straddles versus selling 3mx2y straddles.

It was a tale of two auctions this week as the credit divergence in the periphery was laid bare.

Regulatory proposals surrounding margin requirements for non-cleared derivatives may increase risk, hamper economic growth and result in the implementation of unsuitable hedges by market participants.

Global hedge funds and large asset managers are looking at entering relative value swap trades which play a possible correction in both the Australian and Japanese 10y interest rate curve, paying Japanese yen 10y10y rates and receiving Australian dollar 10y10y rates.

The Depository Trust & Clearing Corp. has landed approval as Japan’s first third party-trade repository, as the Japan Financial Services Agency moves to implement an April 1 deadline for the reporting of over-the-counter derivative trades.

BNP Paribas strategists are touting a duo of cross-asset option plays, one on the iTraxx Senior Financials and DAX, and another on the CDX IG and S&P 500.

Credit Suisse thinks 6m7y risk-reversals on the U.S. Treasury yield curve offer positive carry, potential upside and risk-off tail hedges.

Taiwanese corporates are waiting for greater liquidity in the offshore China yuan spot and non-deliverable forward markets before using options as hedges.

The proposed requirements on loss allocations arrangements for central counterparties to cover non-default losses may put U.K. CCPs at a significant disadvantage to their European and U.S. competitors.

Registered swap dealers can now report over-the-counter trades for all five major asset classes to the DTCC Data Repository in the U.S., making it the first swap data repository to offer reporting across all asset classes.

The Korea Exchange is planning to launch voluntary clearing of Korean won-denominated over-the-counter interest rate swaps sometime between May-and-June via its central clearinghouse. Mandatory clearing will likely to start after August.

TriOptima has held its first post-credit compression cycles—in which market participants tear up existing trades at their own mid-to-market valuations—since the International Swaps and Derivatives Association introduced its big bang and small bang protocols.