Derivs - Interest Rate

With a feared Chinese quarter-end liquidity squeeze failing to materialise, those market players holding 1s/5s CNY flatteners have switched to betting on a data-driven move in the five year sector. Meanwhile, the People's Bank of China (PBoC) is moving to establish closer financial ties with Europe, writes Deirdre Yeung.

Michel Barnier, commissioner of the European Commission, will soon make clearing rules in Japan, Singapore, Australia, Hong Kong and India equivalent with the EU’s regime, but is holding off on making the same determination for the US.

LCH-CME basis swaps, where one counterparty pays a fixed rate on a swap cleared on LCH.Clearnet’s SwapClear versus receiving a fixed rate on a swap cleared by CME Clearing, and vice versa, are to grow in frequency as dealers seek to balance exposure between one or more central counterparties, writes Beth Shah.

Short CNY swaps were being offered on Thursday as some players position for a correction lower after the end of the quarter. The associated steepening across in the 1s/5s curve slope is expected to drive near-term offered-side interest in three to five year swaps, writes Deirdre Yeung of Total Derivatives.

The Securities and Exchange Commission has adopted rules on cross-border security-based swap activities for market participants, mapping out how the regulator will deal with substituted compliance and giving clarification on when swaps will count towards registration limits.

The Royal Bank of Scotland has joined US-based futures exchange Eris Exchange to provide clearing services to clients globally.

The Royal Bank of Scotland has joined US-based futures exchange Eris Exchange to provide clearing services to clients globally.

Short-end CNY swaps turned better offered on Tuesday as concerns about China's growth trajectory re-emerged despite recent firm data, writes Deirdre Yeung of Total Derivatives.

Collateral is being locked up in bottlenecks caused by changes to regulations, central bank policy and risk management techniques, potentially making the take-up of central clearing of over-the-counter derivatives harder.

CNY swaps were better bid across most of the curve on Monday on the back of a firm Chinese PMI report and concerns about liquidity going into the quarter-end, writes Deirdre Yeung of Total Derivatives.

Volumes of package transactions in the US, or derivatives with more than one leg, stabilized Thursday after a brief decline at the start of the week, as rules governing their mandatory execution over swap execution facilities came into effect on Monday.

Tighter Chinese liquidity conditions backed a bid in short CNY swaps on Thursday. A continuation of this pressure is expected to drive flattening pressure across the 2s/5s slope into the end of the quarter. Meanwhile, Nomura has outlined a short-end CNH IRS trade idea, Moody's expects China's credit ratings to withstand the rebalancing challenge and the UK has tightened its CNY trading ties, writes Deirdre Yeung of Total Derivatives.