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Segregated pension schemes transacting OTC derivatives have often sought credit downgrade triggers against the counterparty banks with whom they are transacting. Banks are increasingly reluctant to offer these downgrade triggers. How should pension schemes respond?
Friday, 27 April 2012
Thursday, 26 April 2012
Convertible index-linked gilts? They're called "Maggie Mays".
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In 1983 with an election looming the then Conservative government issued an index-linked bond (the 2% 1999) with an embedded option allowing the holder to convert the bond into a nominal bond (10.25% 1999) at any one of three future dates. This is the first and only time a convertible index-linked gilt was issued.
In 1983 with an election looming the then Conservative government issued an index-linked bond (the 2% 1999) with an embedded option allowing the holder to convert the bond into a nominal bond (10.25% 1999) at any one of three future dates. This is the first and only time a convertible index-linked gilt was issued.
Wednesday, 25 April 2012
How did today's Fed meeting affect your LDI strategy
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So, when in August last year, Ben Bernanke took the unprecedented step of signalling to markets that US short-term interest rates would be on hold until a specified date (mid-2013), I remember asking about the chances that he could back track on that commitment if the data changed. I was unconvinced by the then consensus response that, to back track would hurt Fed credibility. Today I believe we got our answer and I feel vindicated.
So, when in August last year, Ben Bernanke took the unprecedented step of signalling to markets that US short-term interest rates would be on hold until a specified date (mid-2013), I remember asking about the chances that he could back track on that commitment if the data changed. I was unconvinced by the then consensus response that, to back track would hurt Fed credibility. Today I believe we got our answer and I feel vindicated.
Monday, 23 April 2012
Caveat emptor: triggers linked to inflation rates
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Before over-engineering the number you wish to impose for locking into your inflation-only hedge you may wish to consider the shortcomings of the measure you are using to compare against the inflation level you have set yourself for hedging. There are two commonly used measures: cash breakevens and inflation swaps. We consider each in turn.
Before over-engineering the number you wish to impose for locking into your inflation-only hedge you may wish to consider the shortcomings of the measure you are using to compare against the inflation level you have set yourself for hedging. There are two commonly used measures: cash breakevens and inflation swaps. We consider each in turn.
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