Trading GOI and KTB Bond Futures

INDIA - Government Bond Futures and Bills and Who can Trade Them

The National Stock Exchange (NSE) of India offers futures trading on government bonds (10-year) and (91-day) bills a.k.a. 91TDB. Trading members must be registered with SEBI to trade in the Currency Derivatives segment.

Price Quote Convention

Prices are quoted "clean" i.e. without considering accrued interest.

Settlement and Delivery of GOI Bond Futures

Bond futures settle on VWAP during the last thirty minutes of trading, or theoretical value. Note that the 10 year bond futures actually allows delivery of bonds with 8-11 years of residual maturity.

Clearing of Trades

Trades are cleared by NSCCL (National Securities Clearing Corporation Limited), a wholly owned subsidiary of the NSE incorporated in 1995, and the first clearing house to be incorporated in India, starting operations in 1996. Counterparty risk is avoided by cash settlement of the daily mark to market of open positions.

KOREA

Korean Bonds

AsianBondsOnline has good coverage of Korean Won bonds, and presentation of 2, 5 and 10 year yields. In Korea, all fixed income instruments are available to foreign investors.

Bond futures trade on KRX. They are known as KTB futures (Korean Treasury Bond futures), available in 3, 5 and 10 year varieties.

The wholesale market for KTBs is known as KTS (this is also the venue to trade Monetary Stabilisation Bonds, or MSBs and Deposit Insurance Fund Bonds (DIFBs)), and is limited to government bond dealers licensed by the Financial Services Commission (founded in 2008).

Deutsche Bank CDS Spike brings Excitement Back to Credit Markets

Deutsche's 5 year subordinated CDS rose to 540 basis points while one year subordinated CDS increased to 552 basis points. This means the Deutsche subordinated CDS curve is decreasing (a pattern of reversion which started appearing in the summer of 2007 during the credit crisis).

Should you wish to trade CDS speculatively there are some electronic trading options. MarketAxess (MKTX) provides a platform for trading single name CDS, CDS indices and index options. For single name CDS, they support streaming prices and a click-and-trade model as well as RFQ model.

Banks stocks sold off and people put money into gold and yen, which is trading at 113 to the dollar, down from a high of 121 yen on the 1st February 2016. The path of gold was slightly skewed as 1st February 2016 was a day of rising gold prices with a peak of $1258 per troy ounce. So whilst gold rose in response to the bank sell-off it was nothing like the peak earlier in the month, which coincided with a sell-off in the S&P.

ICAP CEO lauds "non-bank trading institutions" in Electronic Trading Arena

Lower EBS volumes and revenues prompts comments on "Non bank" traders

Michael Spencer, CEO of ICAP, remarking on the drop in revenue of his company in electronic markets, exemplified by the reduction in activity on his foreign exchange platform, EBS, has praised the "non-bank trading institutions" such as Ken Griffin's Citadel and Virtu Financial Inc. which are coming in to fill the void left by retreating banks.

Focusing on Technology

Low interest rates have dampened activity from banks in the fixed income, currencies and commodities space in which brokers operate, inciting them to reorient their focus. In particular ICAP is investing in electronic markets, post-trade services and information services. ICAP has also expanded into fintech investment via its Euclid Opportunities initiative since 2011 run by Steve Gibson who was also at Calypso Technology previously.

Stock and Competitors

ICAP stock (IAP.L) was pressured downward following the results. It is regarded as riskier than the overall market with a beta of 1.17. It has a market cap of around 2.69 billion pounds. Its competitors include Tullet Prebon (which is buying ICAP's voice broking business) and Cantor Fitzgerald, which also runs its own investment arm, Cantor Ventures. They also have Cantor Gaming as one of their high technology ventures. Tullet's share price has also been going down, but it has a beta of only 0.75 so the impact, as can be predicted, is rather less than on ICAP.

Global Bond Rally Pushes Yields to Low Levels

Investors are buying up sovereign debt as equities slide - sending US Treasuries yields to a one-year low. Bond indices, such as the BAML World Sovereign Bond Index also tumbled to 1.29 percent, it's lowest value since 2005. Japan's 10 year yields went negative.

National Australia Bank brings Challenger CYBG to the London Stock Market

The National Australia Bank brought CYBG to the LSE on 8 February 2016. The trading service for the stock is SETS, the London Stock Exchange's flagship order book. The CYBG will form part of the FTSE Banks segment with a market capitalization of £1.66 billion on listing. CYBG forms one of the UK's so-called "challenger banks".

The CEO of CYBG is David Duffy who joined in 2015. He was formerly CEO of Allied Irish Bank which has a close relationship with the Irish state.

Shell BG Merger will create World's Largest Producer of LNG - Banks Pile into Bridge Financing

Shell shareholders have approved a merger with their smaller, Reading, Berkshire-based rival BG to create the largest producer of LNG in the world. The merger will take place on Feb 15, 2016. Van Beurden has promised £2.5bn in cost savings.

Barclays Bank is the facility agent for the bridge financing of the deal. Bridge financing is a way to close the gap in order to raise finance to close a deal - at least until such time that the borrower can arrange long-term financing.

Bankers involved with Barclays in financing the deal include:

Alastair Macdonald, Deutsche Bank
John-Paul Way HSBC
Michael Atherton RBC Capital Markets, part of Royal Bank of Canada
Thierry Muschs, Sumitomo Mitsui Banking Corporation

The VIX in 2015 (and a little bit of 2016)

24 January 2016 - the VIX is trading at 22.34.

Exactly five months ago to the date, on Monday, August 24, 2015, the VIX peaked at 40.74, reducing to 36.02 the following day. This corresponded to a sudden drop (and whipsaw action) in the S&P 500 Index.

The next day, though people kept selling the index, they also sold off volatility, anticipating a rebound in the index.

It was also an interesting time to contemplate risk reversals, selling puts and buying calls, to take advantage of the change in market direction (here risk reversal is considered as an investment stratey rather than measure of vol skew).