An article in Risk by Lukas Becker, dated Oct. 1st “Banks avoiding covered bonds for LCR buffer over liquidity fears” caught our attention. For those not familiar with covered bonds – they are more typical in Europe than elsewhere and resemble a securitization.
SIBOS, the 7,000-person strong global conference put on by SWIFT, is mostly about payments and transactional services, but for some time has also been discussing market infrastructure (including CCPs and CSDs). Collateral management shows up on the sidelines; securities lending and repo are rarely present. But we caught one panel in particular yesterday that was quite interesting on the future of market infrastructure. We present below our summary of key points and some feedback of our own.
Even at the once level headed Wall Street Journal, it seems now that any perceived wrong doing by banks is an opportunity for a headline article. This time around the topic is dividend arbitrage in securities lending, which has been flogged, abused and otherwise derided for years. Is it regulatory arbitrage? Of course it is. Is it legal and will be it commonplace until tax authorities harmonize their rules? Yes again. Unfortunately the WSJ has thrown mud into otherwise clearer waters.
Pimco Total Return Fund reduces cash & repo in favor of futures exposure. Are they feeling the lack of liquidity in repo?Read More
- Stay tuned for upcoming events