The Bond Benchmark Continues to Tip to Swaps

11 Pages Posted: 20 Mar 2017

See all articles by Lawrence Kreicher

Lawrence Kreicher

Dartmouth College

Robert N. McCauley

Bank for International Settlements (BIS)

Philip D. Wooldridge

Bank for International Settlements (BIS)

Date Written: March 6, 2017

Abstract

By the 1990s, basis risk had caused bond markets, like money markets before them, to start shifting from the use of government rates as benchmarks to the use of private ones. Developments since the Great Financial Crisis of 2007-09, including derivatives reforms and Libor scandals, had the potential to disrupt this shift. Yet BIS data on derivatives turnover indicate that interest rate swaps continue to gain on government bond futures for hedging and positioning at the long end of the yield curve. However, the ease of unwinding positions in futures may stop swap rates from completely displacing government bond rates as benchmarks.

JEL Classification: G12, G15

Suggested Citation

Kreicher, Lawrence and McCauley, Robert N. and Wooldridge, Philip D., The Bond Benchmark Continues to Tip to Swaps (March 6, 2017). BIS Quarterly Review March 2017. Available at SSRN: https://ssrn.com/abstract=2931566

Lawrence Kreicher

Dartmouth College ( email )

Department of Sociology
Hanover, NH 03755
United States

Robert N. McCauley (Contact Author)

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

Philip D. Wooldridge

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

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