Dear RepoClear Member | FT Alphaville

Dear RepoClear Member

LCH.Clearnet has doubled the margin requirement on members’ trading in Irish government bonds — just a week after this was lifted to 15 per cent.

Here’s Wednesday’s letter, which contains something of a disclaimer, to members:

Dear RepoClear Member,

1. In accordance with the Sovereign Risk Framework issued on 5 October 2010, and in response to the sustained period during which the yield differential of 10 year Irish government debt against a AAA benchmark has traded consistently over 500 bp, LCH.Clearnet Ltd has revised the risk parameters for Irish government bonds cleared through the RepoClear service. The total margin required for positions of Irish government bonds will consequently be 30% of net positions.

2. This will also apply to Irish government bond exposures in the single ‘A’ €GC basket.

3. 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 Risk Framework issued on 5 October 2010.

4. The additional margin will be charged on net exposure at close of business on Thursday 18 November 2010 and will be reflected in a margin call on Friday 19 November 2010.

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

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

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

8. This circular supersedes circular LCH.Clearnet Ltd Circular No 2718; RepoClear/151 dated 11 November 2010.

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

Christopher Jones Director, Risk Management

Talk about kicking a man while he’s down.

That said, yields on Irish bonds hasn’t risen that much this morning. And that could be a sign that Irish banks closed out most of their repo transactions with LCH last week and have since turned to the ECB.

(Haircut reference removed)

Related link:
Revised risk parameters for Irish government bonds – FT Alphaville
The morning after… – FT Alphaville
Touching negative basis in Ireland – FT Alphaville