Sovereign Credit Commentary

With less than 10 months to go before the expected implementation of the Settlement Discipline Regime in February 2021, the sell-side’s preparations are well underway. Given the potential impact of SDR on banks and broker-dealers, there is extensive ground to cover ahead of the go live date.

In a negative interest rates environment, dividend strategies are becoming increasingly popular as a way to create positive yield for investors.

As UK loan, bond and derivative market participants work to the deadline of December 31, 2021 to stop using Libor, one of the biggest hurdles is how to calculate the new reference rate: Sonia.

Nearly six years ago to the day the European Commission adopted the technical standards for the European Market Infrastructure Regulation (EMIR) that, among other things, mandated the reporting of derivatives contracts to trade repositories.

The breakdown of trust in ISDAfix following allegations of collusion and manipulation in 2012 led to a complete overhaul of the benchmark. A recent report by the Financial Conduct Authority proves that the hard work is paying off, reaffirming the potential for the model to be applied to other benchmarks.

Inline warrants are growing in popularity as a means of generating returns when volatility is low.

​New regulations have uncovered heaps of data that markets are struggling to handle. But as participants discover issues exist they did not realise existed, the data revolution will result in safer and more efficient markets for all.

As banks struggle with tracking brokerage costs, they need to work out ways to properly manage cost transparency by normalising their trade data.

Proponents of the ISDA Common Domain Model say that if properly implemented, it could generate major cost savings for financial institutions. But what is it, what prompted its creation and how could it work with distributed ledger technology?

Not a day goes by without some analyst, regulator or senior exchange executive weighing in on where the clearing of euro swaps should reside post-Brexit.

Equity repo, a way to lend shares to the market, is a key parameter in equity derivatives trading but is yet to be fully considered and monetised. Given the opportunities that exist in the space, market participants would do well to change tack.

Deal-contingent hedging can be a great way to hedge risks associated with mergers and acquisitions, but a number of pitfalls can flummox first time users of these specialist derivatives.

While market capitalisation weighted indices and portfolios have been incredibly popular in recent years, data show that their equally weighted brethren can have an edge with lower concentration risk and better performance.

The wide-ranging management shake up at Deutsche Bank is set to continue after the German lender picked former Goldman Sachs partner Alasdair Warren to lead its new corporate and investment banking unit in Europe, the Middle East and Africa.

Amid all the talk of an emerging markets “crisis,” credit spreads in the western world took a breather as participants awaited crucial economic data in the U.S.

Peripheral eurozone debt has made a strong start to 2014 and the positive momentum continued with Portugal tapping the capital markets for funds.

Slovenia’s CDS spreads have rallied after the sovereign released results of its asset quality review and stress tests.

The European Central Bank’s role in the rally over the last 18 months is significant, but its inaction and cautious tone at its December meeting helped trigger a minor bout of risk aversion.

Conflicting signals from the world’s two most important central banks kept credit markets in a tight range.

Ireland took a big step towards fiscal normality after it announced that it would make a clean exit from its E.U. bailout.

Credit spreads continued to grind tighter as the favorable monetary policy outlook in the developed world sets the scene for a solid end to the year.

Political stasis in the U.S. weighed on global credit markets as the government shutdown entered its second week.

The Federal Reserve isn’t in the habit of shocking the markets. Back in 1994, when it surprisingly hiked rates, the central bank triggered a major sell-off in the bond markets.

Credit default swap spreads on Nokia more than halved earlier in the week after the surprise announcement that Microsoft will purchase the Finnish firm’s mobile phone business for USD7 billion.

“The crisis in Europe is over,” declared French President François Hollande last month during a visit to Japan. But it appears that EU politicians may be once again guilty of complacency after Portugal reminded the world that the crisis was dormant, rather than extinct.

Barclays made the most senior hire of the week, appointing ex-Goldman Sachs trader Michael Winkelgrund as head of exchange-traded fund trading. Deutsche Bank, meanwhile, hired Monty Lee as a senior index options trader from Barclays. In Asia Pacific, Nicholas Smith has replaced PJ Andersson as global head of pan-Asian equity derivative and convertible sales at Citigroup, after the latter left the firm last week.

Credit spreads across the globe have rallied on the back of Abenomics, the unconventional, expansionary monetary policy implemented by the Bank of Japan in April.

Korea’s sovereign CDS recovered from a recent bout of widening and was back to its usual place–flat against China.

Another week in the sovereign markets and yet more barriers are being broken down.

After the drama of the Cyprus bailout it was back to focusing on economic fundamentals in the sovereign market.

A bailout for Cyprus was agreed before the deadline, as expected. However, the relief rally that often follows such announcements didn’t materialize, and the EU only had itself to blame.

Political turmoil in Italy has been the main sovereign credit story in the first-quarter, but the periphery has proved to be surprisingly resilient since the inconclusive election in February.

Negative catalysts have been few and far between in recent months, but one arrived with a vengeance this week in the form of an inconclusive Italian election.

France and Germany have always been at the core of the eurozone, and the European Union project as a whole.

The Italian elections are but days away, and the sovereign credit markets could be forgiven for being jittery. However, they put in a solid performance over the second week of February, with spreads in the Eurozone’s periphery tightening significantly.

Spain and Italy were always going to be the most topical of the eurozone peripherals in the first-quarter of 2013, and they have lived up to their billing so far.