LCH Hikes Irish Bond Margin To Over Half, From 45% to 55%

Tyler Durden's picture

It seems like yesterday that the LCH reduced Irish bond margins from 45% to 35% (it was actually 4 weeks ago). Since then, as the CME has demonstrated so well, when in need of some temporary price hike, best to just purge the "speculators." And to wit: after hiking margins back to 45%, LCH.Clearnet has for the first time raised Irish bond margins to over half, or 55%. Whether this will work as effectively in "normalizing" Irish bond prices, as it has so far "worked" with silver, remains unclear.

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Mr Lennon Hendrix's picture

This is like me charging $20 for a cupcake.

uhlmant's picture

Doesn't all these margin hikes suck liquidity out of the "system" increasing the likelihood of 2008 redux?


Purposeful or unintended consequence?

RunningMan's picture

Does it work on both sides of the trade, to purge speculators against the bonds? Legit question - I don't know. More broadly, interesting idea that liquidity can have low and high quality (short term/speculation vs long term). Same with housing (investor vs owner occupied), commodities (holding paper vs physical), etc.

uhlmant's picture

Does it work on both sides of the trade, to purge speculators against the bonds?


This assumes that only speculators would invest in Irish bonds.  Seems pretty short sighted to me.  Pushes out "speculators" but likely flushes out others.  Hence the unintended consquence.  I think margin hikes ultimate are detrimental

SheepDog-One's picture

Not only that, but when everyone sees no matter what you buy getting leapt upon by the criminal manipulator syndicate when theyre unhappy with where it goes...who the hell will keep playing?

Urban Redneck's picture

More like erases liquidity from the system by reducing leverage available on the underlying asset.  It's a well known consequence.  Irish bonds are a paper hot potato with bankers and politicians of all stripes having interests so the LCH margin changes have been schitzo. 

Clorox Cowboy's picture

Uh oh (or hooray, depending) just pooped itself.

SheepDog-One's picture

So we're now in a 'trading' environment where you buy something, and if the OverLords dont like it, they just take it away? My question is who is dumb enough yet rich enough to keep playing this stupid game where everyone except the riggers are guaranteed to lose?

WALLST8MY8BALL's picture

Check out this "Infomercial" from the CME regarding Margin rate changes. It was put out today.

my favorite line...

Margins are set as part of the neutral risk management services we provide. They aren’t a means to move a market one way or another, or to encourage or discourage participation from one kind of market participant or another. Rather, margin is one of many risk management tools that help us assess overall portfolio risk to protect market participants and the market as a whole.

DonutBoy's picture

Let's see, if it's 55% of par - that would pretty much be a cash transaction for the bond, maybe a little over the mark.

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