It was a long time coming, but the recovery in listed interest rate derivatives now seems well under way. But as Elise Coroneos reports, the market will not just go back to the way it was; this year is going to be lively.
Traders are wary of being triumphant, but the slump of more
than a year in listed fixed income derivatives definitely seems
to be over.
In February, all three of the big exchanges – CME
Group, Eurex and NYSE Liffe – enjoyed a strong
recovery in trading of interest rate futures and options.
These products, like many financial instruments, were left
stranded by the big retreat from risk of late 2008 and early
Hedge funds and other investing institutions slashed their
positions and deleveraged their balance sheets, leading to
sharp falls in trading volume and open interest.
Many dealers were able to capitalise by widening their
bid/offer spreads, profiting from investors that had to put on
trades. However, wider spreads could not make up for the fact
that many of what were once big players in these highly liquid
markets had seized up or died.
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