Last week it was Ireland, where bond margins rose to over half, or 55%. Now it is Portugal's turn, where following the glowing success of silver speculative destruction (and crude, not so much), LCH.Clearnet has now hiked bond margins from 35% to 45%. Soon everything in the world will trade cash only... except for stocks of course. Stock margin debt is close to an all time high. But nobody is bothered by that particular speculative element. Ever.
Dear RepoClear Member,
In accordance with the Sovereign Credit Risk Framework and in response to the yield differential of 10 year Portuguese government debt against a AAA benchmark, LCH.Clearnet Ltd has revised the risk parameters for Portuguese government bonds cleared through the RepoClear service. The additional margin required for positions of Portuguese government bonds will consequently be increased from 35% to 45% for long positions; this amount will be adjusted for the current bond price*. Short positions will pay a proportionately lower margin.
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.
The additional margin will be reflected in a margin call on Wednesday 11 May 2011.
Executive Director and Head of Risk Management