Revised risk parameters for Irish government bonds | FT Alphaville

Revised risk parameters for Irish government bonds

Wednesday’s theme du jour — margin hikes.

LCH.Clearnet, one of Europe’s biggest clearing houses, is asking members to stump up more cash to trade in Irish bonds.

Here’s the memo LCH’s director of risk management Christopher Jones has sent to clients on Wednesday morning:

(Emphasis ours.)

Dear RepoClear Member,

1. In accordance with the Sovereign Risk Framework issued on 5 October 2010, LCH.Clearnet Ltd has revised the risk parameters for Irish government bonds cleared through the RepoClear service. The margin required for positions of Irish government bonds will consequently be increased by 15% of net exposure. This will also apply to Irish government bond exposures in the single ‘A’ €GC basket. LCH.Clearnet will continue to monitor the situation closely and keep the parameters under close review.

2. The additional margin will be charged on net exposure at close of business on Thursday 11 November 2010 and will be reflected in a margin call on Friday 12 November 2010.

3. Those members affected by the changes will be contacted individually later today and given an indication of the size of the margin call.

4. Details of the Sovereign Risk Framework can be found on the LCH.Clearnet website ( under Risk Management > Ltd > Margin rate circulars > RepoClear.

5. Report 74 (available on the LCH.Clearnet Member Reporting website) will detail any further changes in the margin levels charged under this framework.

6. This circular supersedes circular LCH.Clearnet Ltd Circular No 2702; RepoClear/147 dated 25 October 2010.

7. For further information please contact either myself (, +442074267103 or Tom Chapman ( +442074266338

Christopher Jones Director, Risk Management

Not a huge surprise in view of that fact LCH told members last week that they might be required to deposit more cash to trade Irish sovereign bonds.

Still it’s hardly helpful from an Irish perspective.

Indeed, the Irish/German spread has risen to a record high of 579bps this morning.