Derivs - People and Markets

The surging rally in credit markets since the start of the month hit an impasse this week, as trader caution set in ahead of key policy decisions by the Bank of Japan on Friday and the Bank of England next week.

An auction to settle credit default swaps referencing Portugal Telecom International Finance returned a low final price, but slightly higher than had been indicated by secondary bond and CDS levels despite greater physical settlement interest to sell.

The International Swaps and Derivatives Association has published a ‘clearing classification letter’ that will enable derivative counterparties to notify each other of their status for clearing requirements under Hong Kong’s mandatory clearing regime.

The chief executive of ICAP’s EBS BrokerTec has stepped down from his post, and is set to leave “in due course,” according to the company.

US banks, which opened second quarter reporting this week and last, said Brexit had driven ‘new peaks’ in volumes at trading divisions, with signs of market share gains for the US houses as well.

IHS Markit and the International Swaps and Derivatives Association (ISDA) have struck a deal with the European Commission that will open up access to the rights of their intellectual property, in a settlement over an anti-trust probe that has been ongoing since 2011.

Persistent dislocations between the CDS and cash bond markets are only likely to continue, because of the increased cost of regulations, limited balance sheet capacity at banks, and relative illiquidity in the cash bond markets, according to a staff report from the New York Federal Reserve.

Mizuho Americas has hired Thomas Harnett as senior managing director and head of fixed income sales and trading.

US territory the Commonwealth of Puerto Rico has triggered a failure to pay credit event, the International Swaps and Derivatives Association’s Determination Committee has ruled after a week of deliberation.

The proposed merger of the London Stock Exchange and Deutsche Börse looks set to allow Frankfurt to prise euro swaps clearing away from London, amid rising expectations that regulators will require the combined entity to move euro business back within the eurozone.

Big moves in credit, equity and foreign exchange markets this week were magnified by mass unwinding of previously popular trades as investors capitulated to a reversal of fortunes for Japan and European banks.

In the heady days of 2004-2007, before the Great Moderation came to a shuddering halt, it seemed set in stone that European investment grade credit default swaps traded tighter than their North American counterparts.