Derivs - Interest Rate

Counterparties should not have to post margin for non-cleared swaps on the same day of execution, nor should covered swap entities be barred from netting initial and variation margin requirements across asset classes and financial products, say the International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association in a joint comment letter to bank regulators last week.

ING Bank has issued a worst-of memory coupon note with a lock-in feature, linked to the CECE Composite Index EUR and the iShares S&P Latin American 40 Index Fund, which pays an annual coupon of 7.8%.

Coming off the U.S. holiday, Treasuries have returned to their “safe haven” stature and have risen this week, pushing 10-year yields to a one-week low as China’s announcement it will raise interest rates for a third time this year spurred concern that this will cause world economic growth to slow and subsequently discourage risk demand.

VTB Capital, the largest investment bank in Russia, has opened a branch in Hong Kong to be headed by Judy Lim, chief executive officer of VTB’s Singapore unit, Bill Mui, former chief operating officer of Cypress Lane Capital in Hong Kong, and Hua Shen, former managing director at Mitsubishi UFJ Securities.

The Financial Industry Regulatory Authority has fined Morgan Stanley $575,000 over alleged supervisory failures involving total return swaps and offshore stock loans.

AsiaClear, the over-the-counter derivatives clearing arm of the Singapore Exchange, cleared USD11.6 billion worth of OTC interest rate swaps in June, which is more on par with earlier months than the outlier figures seen in the two preceding months.

VTB Capital, the largest investment bank in Russia, has opened a branch in Hong Kong headed by the Judy Lim, chief executive officer of VTB’s Singapore unit; Bill Mui, former chief operating officer of Cypress Lane Capital in Hong Kong; and Hua Shen, former managing director at Mitsubishi UFJ Securities.

With the austerity package approved in Greece, markets found breathing room and returned to some form of normality, at least in the very short term. With riots and demonstrations seen outside parliament whilst the first vote took place, Greek Prime Minister George Papandreou won enough votes to secure the first part of the austerity plan aimed at meeting the E.U.’s aid requirement plan.

Prior to the credit crisis, interest rate modelling was generally well understood. The underlying fundamental principles had existed for over 30 years with steady evolutions in areas that were most relevant to options and complex products.

Long-dated interest rate forwards and curve steepener volumes have shot up by five times over the past two weeks as the euro 10s/30s interest rate curve has steepened in anticipation of the final Dutch pension reform, market participants said.

BNP Paribas has reorganized its fixed income business as it looks to build out U.S. dollar, emerging market and Asia Pacific capabilities, according to a memo from the firm.

If we are to glean anything from the Federal Opens Markets Committee meeting this past week, and the accompanying Q&A from Fed Chairman Ben Bernanke, it’s that ‘Team Fed’ is most definitely still in wait and see mode.