LCH Hikes Margins On Portuguese And Irish Bonds To 80%, Above Market Prices On Numerous Issues

Tyler Durden's picture

Once this number passes 100%, one will need to deposit more cash than bond par notional to short the cash product. With CDS trader stigmatizing no longer working, the criminal cartel continues to target cash players. It is interesting that some market prices on bonds are below the actual cash requirement threshold (80%). In essence LCH just set a fake recovery rate on PIIGS cash bonds at 80 cents on the dollar.

From LCH

Dear RepoClear Member,

accordance with the Sovereign Credit Risk Framework and in response to
the yield differential of 10 year Portuguese government debt and 10 year
Irish government debt against a AAA benchmark, LCH.Clearnet Ltd has
revised the risk parameters for Portuguese and Irish government bonds
cleared through the RepoClear service.  The additional margin required
for positions of Portuguese government bonds will consequently be
increased from 65% to 80% for long positions.  The additional margin
required for positions of Irish government bonds will be increased from
75% to 80% for long positions
. These amounts will be adjusted for the
current bond price*.  Short positions will pay a proportionately lower

This decision is based solely on
publicly available yield spread data and in no way represents a forward
looking market view. LCH.Clearnet will continue to monitor yield spreads
closely and keep the parameters under close review in accordance with
the Sovereign Credit Risk Framework.

1. The additional margin will be reflected in a margin call on Wednesday 29 June April 2011.

2. For further information please contact either Tom Chapman ( or  +442074266338 or Lianne Arnold ( +442074267376


Chris Jones

Executive Director and Head of Risk Management


* The impact of bond price can be material. For example, an 80%
multiplier applied to a trade with a current price of 70 would equate to
approximately 50% of nominal value.


Note some of the issues that are trading below 80:

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KingPin 999's picture

At this point I don't see why it matters. The big boys can get loans outside of the exchanges if they want to lever up. Don't see how a margin this high matters when there is free money floating around everywhere just dying to land in a hedge funds hand.

zKeyserSoze's picture

maybe to issue more with higher coupons, what the heck, y not double down? birds are chirping, the world hasn't ended....

disabledvet's picture

by "Big Boys" do you mean the "people of Ireland" and "the empire of Portugal" or the folks setting the terms for becoming a buyer of their debt?

johngaltfla's picture

It's transitory. Don't sweat it.

Clueless Economist's picture

How does CNBS make any $ with commercials like Gerber Life Insurance...I may be in my pajamas but I'm studying for MBA...Bill Schaefer made a financial gain with his invention...GET MAGIC JET!!!


SheepDog-One's picture

CNBS gubment subsidized financial blowhorn of the administration, Jeff Immelt is Obamas butt-boy on his economic advisory staff, so theyre paid well to spout their BS.

disabledvet's picture

they hate their country in a time of war--and act on it with "extreme prejudice."  Only Life Insurance policy on that score is God.  Perhaps they should lay down their tatami mat and pray to Mecca 5 times a day before starting their day? 

hugovanderbubble's picture

Tyler and ZH readers,


This is illegal


Short Euro, Short French and German Banks

Central Banks selling Gold to obtain profits and cash to save Greece, but hows possible XLF at lows¿??????????????????'


zKeyserSoze's picture

cool screen,

Questions and Answers

IMF Resources and the G-20 Summit

Last Updated: February 11, 2010


At the G-20 Summit on April 2, world leaders pledged to support growth in emerging market and developing countries by boosting the IMF's lending resources to $750 billion. They committed to:

  • increase the resources available to the IMF by $250 billion through immediate contributions from some IMF member countries. The G-20 agreed that these bilateral contributions will subsequently be incorporated into an existing credit line the IMF maintains with some of its members, known as the New Arrangements to Borrow, or NAB. The G-20's intention is to increase the resources available through a more flexible NAB by up to $500 billion.
  • use additional resources from agreed sales of IMF gold to provide $6 billion in additional financing for poor countries, in a manner consistent with the IMF's new income model, over the next 2 to 3 years.

In addition, the G-20 supported a general allocation of the IMF's Special Drawing Rights equivalent to $250 billion to boost global liquidity. The G-20 also urged urgent ratification of the Fourth Amendment to the IMF's Charter, first proposed in 1997, which seeks to make the allocation of SDRs more equitable.

Below follows a list of commonly asked questions about the proposed increase in the NAB, the new SDR allocation, and gold sales. While certain aspects of the implementation of the G-20 agreements have become clear, the IMF is still discussing other aspects, so some of the details are not yet available.

topcallingtroll's picture

Do you mean the EU guaranteeing a sovereign bond so that it gets a risk free rating? If so I agree. Otherwise I dont understand.

hugovanderbubble's picture


its like a "pseudo Eurobond" backed by the Chinese flows.) transmitted to ECB clearing accounts:)

topcallingtroll's picture

I will have to agree with robottrader here.

The easy trade is cash, gold, and even high grade corporates

The hard trade is energy, stocks, high yield sovereign bonds and low yield treasurys.

I am still all in energy and my spec accounts....decided i dont have time to stress and watch double long etf's right now.

In the long run there is no alpha.....only destiny

SheepDog-One's picture

You have to agree with Robotrader, how? You agree that you look at what happens to be up, then post the tickers here acting like you owned it before it went up?

hugovanderbubble's picture


9 from 10 subsectors net sellers

just telecoms real net buyers... If this is not defensive playing...:)


Regards, Sheep

topcallingtroll's picture

No i always post my trades in real time.

Documented a few days ago buying vde at 105.54

Also documented a bout a month ago going from an all cash portfolio to all stock in my spec accounts. I posted several times that the post qe2 correction might be over already and pre anticipated by the market.

But i am ready to flee to cash at any time!

scratch_and_sniff's picture

They are just anticipating whats obviously coming next! Either Portugal or Ireland, coin toss - lets have a pop at Portugal, it’s still a virgin.

topcallingtroll's picture


But there ought to be an inflection around here somewhere for at least a five percent pop as things calm down for a couple of months.

scratch_and_sniff's picture

Nah, its already happening mate, new daily highs on Portugal and ireland 2 year yields happening near enough everyday(restructuring being priced in) hence the margin hikes mentioned above. Im just reading now about the 10yr spread between portugal and Ireland going from flat in june to around it looks like portugal will be next for the firing squad. What are you talking about 5%? What on, Euro/usd?

topcallingtroll's picture

You are probably right with portugal and ireland. I think they may hold steady from here, but i do hope that spanish bonds rally from here and we could see some nice gains in us stocks as well, if we muddle thru temporarily on greece.

optionsoptions's picture

Hey Tyler I think you misread the margin hike. You wrote "In essence LCH just set a fake recovery rate on PIIGS cash bonds at 80 cents on the dollar." and that Short Positions will need to post more bond cash than notional which is shown to be incorrect here "Short positions will pay a proportionately lower margin." and especially here:* The impact of bond price can be material. For example, an 80% multiplier applied to a trade with a current price of 70 would equate to approximately 50% of nominal value.

 so those bonds trading below 80 don't need 80 cents worth of margin (over 100%) but 80% of the amount they are trading (so if its trading at 60 then 60*.80)

Urban Redneck's picture

My blood to caffeine level isn't where it should be, but the percentage of nominal value is irrelevant for new positions since they aren't trading anywhere near par, and the number of even mark-to-myth PIIGS buyers picking up 10-year debt to hold to maturity should be about 0. 

disabledvet's picture

i fail to understand how this is an attack on cash markets.  it seems obvious this is an attack on Portugese and Irish debt, no?  "Pay up with actual money and no leverage"?

RobotTrader's picture

BBVA, STD have held their recent lows so far.

Just waiting for more strength in HBC, then it will be off to the races for stocks.

mendolover's picture

Can't wait for Italy to gets it funk on!