Interesting article from Bloomberg about the history and plight of LIBOR and the complaints that market participants have levied against the indices that set values for some $360 trillion face of financial assets around the world.  Primary concern to me is the fact that perceived credit quality is tied to each bank’s offered rate.  Should bank rate submissions be anonymous to the marketplace?

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An example of why we and other swap advisors are available in the marketplace to help clients manage interest rate exposures in a cost-effective manner. (NY Times)

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An interesting article from the New York Times, “A Secretive Banking Elite Rules Trading in Derivatives” on the incentive for leading banks to control the over-the-counter derivatives market and the proposed clearinghouses.  Cardea Partners helps our clients combat this natural disadvantage in the marketplace and reduces the unseen fees of such swaps transactions by creating transparency and competition. (NY Times, December 12, 2010)

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The global derivatives market could expand significantly this year, a report prepared by advisory firm TABB Group says.

The company’s study, which was commissioned by the World Federation of Exchanges, estimates that $700 trillion in derivatives could be traded by the end of the year. At year-end 2009, the derivatives market was worth $615 trillion; at the middle of 2010, it contracted slightly to $583 trillion, according to TABB.

But with volatility on the rise in the currency and commodity markets – and more companies using derivatives to hedge their risk exposure – the derivatives market could be poised for significant growth.

Indeed, the Wall Street Journal quoted TABB senior analyst Paul Rowady as saying, derivatives may be used “as a key component of a broader risk-transfer mechanism for global financial firms, corporations and investment managers.”

But, the research firm cautioned, the new regulations mandated by the Dodd-Frank financial reform bill could crimp derivatives trading significantly. TABB estimates that the bill could require market participants to post up to $2.2 trillion of collateral against their derivatives trades.

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A common restructuring technique for existing interest rate swaps is the amend or blend and extend, where the present value of an exisitng trade is rolled into the rate of a new deal.  There can be a number of pitfalls to this strategy, and clients should be aware of all ramifications.  Click to see our monthly piece from August that speaks to this structure below:

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Cardea Partners – Interest Rate Swap Blend and Extend

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Give us a call to discuss further if your firm is involved in a swap restructure.

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