Negative Spreads on Interest Rate Swaps: Could Repo be the Cause?

Business Objective

There has been a lot of press about negative swap rates — where the fixed side of an interest rate swap (IRS) is lower than the equivalent maturity US Treasury. Lower rates imply a better credit counterparty, and in this case better than the US government. But this aberration actually has a repo component that is ignored at one’s peril.

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An interesting twist in returns from cash and non-cash collateral in securities lending (Premium Content)

We came across some interesting data that presents some subtle revenues dynamics at play in the securities lending market. The issue at hand has to do with cash vs. non-cash collateral, what drives demand and how agent lenders are generating profits.

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Regulators, please note: the focus on Shadow Banking regulation must be on the smart allowance of risk (Premium Content)

The topic of shadow banking has been in the press lately, driven by the Financial Stability Board’s recent annual Shadow Banking monitoring update. This update was nothing if not full of gas and big numbers, but at least they pulled out an important point: some Shadow Banking matters and some doesn’t, so let’s get to the heart of the matter and figure out what’s worth worrying about. Maybe the rest should just stay in banks where it belongs for effective risk management.

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