1/19/2012 4:11:01 PM |
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| With the MPC keeping the repo rate at 5.5% (as expected), the focus turned to the text and tone of Governor Gill Marcus’ speech to provide some colour to the interest rate outlook. In a nutshell, the global economy is still uncertain, economic growth estimates have been cut and some upside risk to inflation remains. In the end, the governor ...read more |
1/16/2012 5:02:28 PM |
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| The Monetary Policy Committee (MPC) meets this week to discuss the South African economic outlook and, in particular, the level of interest rates. Consensus is for rates to remain on hold. The short-term interest rate (STIR) market is the one market where interest rate expectations can be traded and hedged. The STIR market is the generic market term given ...read more |
1/12/2012 3:18:03 PM |
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| As everyone heads back from holidays, forgets lazy beach days and examines the markets, it seems appropriate to look at the state of the short-term interest rate market. What has happened over the past month and what is the JIBAR futures market saying? In December 2011, the JIBAR 3m rate (the 11am fix) ticked up from 5.575% to 5.595% - ...read more |
12/22/2011 11:40:48 AM |
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| After staying static for almost 11 months, the rate is seeing some spikes. It is only three weeks down the line, yet we experience another increase! In a previous blog entitled “How JIBAR futures provide info about MPC”, we explained how this 3 month spot rate is closely linked to a policy rate, i.e. REPO rate and thus reacts ...read more |
1/5/2012 10:02:24 AM |
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| In Part I we discussed hedge ratios and determined the best way to calculate a hedge ratio via the Price Value of a Basis Point (PVBP) concept. This method is preferred since it takes the behaviour of the asset (or portfolio of assets) and the futures contract into account. To determine the PVBP of an asset, we would price the ...read more |
12/22/2011 3:31:13 PM |
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| The Dec11 JIBAR futures contract expired yesterday and closed out at the level of the 3 month JIBAR, i.e. 5.585%. The Open interest was 5 541. Today, a new contract was launched - 18 Dec13. For further info, contact jibarfutures@jse.co.zaread more |
12/22/2011 12:10:22 PM |
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| The last newsletter for 2011 – feel free to access, topics covered: Festive wishes from the Interest Rate team at the JSE Changes in market sentiments as expressed by JIBAR futures Recommended reading for short term rate expectations Market statistics for interest rate products Download the newsletter, or view previous ones here. To subscribe to the newsletter, please email ...read more |
12/14/2011 5:02:09 PM |
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| The objective of hedging a fixed income asset (or portfolio) with futures contracts is to ensure that the potential loss incurred by the asset is compensated by a profit in the futures hedging instrument. A hedge ratio is the number of contracts required to offset potential loss in the specific asset. There are a number of ways to determine ...read more |
12/7/2011 12:02:18 PM |
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| Treasurer wishes to borrow 10m for 3 months on Wednesday, 21 December 2011. He is worried that interest rates will rise prior to this date and he decides to hedge the future exposure. Hence the Treasurer SELLS 100 Dec11 JIBAR futures at the market rate of 5.50%. On expiration date, the JIBAR 3m spot rate has moved up 35 ...read more |
12/1/2011 5:01:35 PM |
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| The 3 month JIBAR fix has been static since Jan-11 at a level of 5.575%. This morning, after polling quotes from the contributing banks the mid was established at a new level of 5.580%. From late Jan-11 to end of Jul-11, the rate remained at a level of 5.575%. Thereafter it fluctuated between 5.585% and 5.605% in the month of ...read more |
11/9/2011 3:03:18 PM |
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| It is possible to view JIBAR futures prices on a live screen. This price transparency exists within a fair and anonymous market where two way prices (bids and offers) are quoted on a central order book across all 12 listed contracts. To access the live pricing of these futures on the JSE website please follow these steps: Go to www.jse.co.za/jibarfutures ...read more |
11/22/2011 3:35:48 PM |
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| Interest rate markets in South Africa never wait too long for direction. While rates in the short end (to 1 year) remain flat, the longer rates (1-2yr) have moved up as reaction to the passing of the secrecy bill Contracts 10 Nov (MPC date) 21 Nov 22 Nov (15h30) Dec12-11 spread -4bp 31bp 34bp Jun13-12 ...read more |
11/22/2011 2:57:25 PM |
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| After the recent turmoil surrounding the “to cut or not to cut” MPC meeting, the interest rate market seems to have quietened down. The JIBAR futures are trading flat out to 1 year and slightly positive from 1 to 2 years. Looking for direction from anywhere, one trader says there is “lots of nervousness around the European situation. Market has ...read more |
11/18/2011 3:51:33 PM |
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| This webinar is now free to download. It was run by Simon Brown of JustOneLap and will introduce you to the concept of JIBAR futures and explain all the details and nuances. Click here for access to the downloadread more |
11/16/2011 5:02:41 PM |
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| Many interest rate traders look to trade the shape of the curve as opposed to a trading an outright point on the curve. I suppose it makes sense in that it seems easier to have a view about the changes in relative shape of a curve as opposed to an absolute view on a specific point on that curve. It ...read more |
11/16/2011 11:23:05 AM |
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| The Nov11 JIBAR future contract closed out at 11am on 16 November 2011 at a level of 5.575%. The open interest was 1700 contracts. While the JIBAR fix did not move in the past month, there was some activity around the MPC meeting. The near-dated Nov11 futures rates moved downwards about 15-20bp as some bullish sentiment surrounded the MPC meeting, ...read more |
11/15/2011 5:00:28 PM |
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| I have mentioned the common interest rate strategy (see here) of taking positions on the expected change in SHAPE of the JIBAR futures curve by trading JIBAR futures spreads. As an example I have mentioned the Mar12-Mar13 spread. That spread has moved from 114bp (end Jun11) to 75 bp (end Sep11) and down to a low of ...read more |
11/14/2011 10:28:08 AM |
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| Market will continue to be dominated by Euro woes despite some progress on Italian political front but real solutions don’t seem forthcoming. Local focus is on consumer related statistics with the Consumer Confidence Index and September Retail Sales out on Wednesday. Remember to view JIBAR futures hereread more |
11/14/2011 8:42:07 AM |
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| Simon Brown of JustOneLap will be hosting a webinar on Wednesday, November 16. Once the domain of hedge funds and banks, interest rate futures are now tradable by all with the JIBAR futures contract introduced by the JSE. These futures contracts can be used to take advantage of expected moves in interest rates (up or down) or to hedge exposure ...read more |
11/10/2011 4:22:52 PM |
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| The MPC decided to keep repo rates static at 5.5% at its November meeting, announced on Thursday, 10 November 2011. A number of reasons were cited, inter alia: Ongoing Euro problems Inflation expected to peak in 2011 Q1 Upside risk to inflation, led by accelerating food prices The JIBAR futures had priced in a 40% chance of rate cut and ...read more |
11/9/2011 1:30:30 PM |
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| From previous blog post, we explained how the JIBAR futures market provided useful information about rate expectations. Here are some comments from a rates trader comparing current situation to previous MPC: Global economy looks worse now Local inflation is higher – does MPC cut into rising inflation? Only 1 MPC member argued for a cut last time Is there ...read more |
11/7/2011 12:05:42 PM |
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| In response to a few queries, here is a brief explanation of how JIBAR futures provide information on the upcoming MPC decision. Remember that the repo rate is a policy rate determined by the MPC while the 3-month JIBAR spot rate is a market rate indicating average bank NCD pricing. The spot rate moves with market expectations but is closely ...read more |
11/7/2011 10:18:31 AM |
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| This week sees the MPC meeting to discuss interest rate policy and the debate on expected rate moves will dominate local markets. As mentioned in previous blog post, the views are mixed. The recent ECB rate cut fuelled the hope of possible rate cut, but local economic factors will also be considered. Meanwhile, JIBAR futures rates have been declining and ...read more |
11/4/2011 10:03:36 AM |
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| The European Central Bank (ECB) decided to cut rates yesterday, 3rd Nov 2011, by 25bp. This has revived expectations of a rate cut by the SARB next week. This sentiment is reflected in today’s JIBAR futures levels moving down between 5-10bp across the JIBAR futures curve (from mtm levels of last night). While there may be different views ...read more |
11/3/2011 12:53:37 PM |
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| The Nov-11 margins have been published. The margin charged on a JIBAR futures contract is from R60-R90 per contract on an underlying value of R100k. The JSE does provide margin offset. While JIBAR spot rate is not very volatile, the futures do move around as interest rate expectations change. The contract is traded on a yield basis and the contract ...read more |
11/2/2011 4:48:05 PM |
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| Join us for a Webinar on November 16. Once the domain of hedge funds and banks, interest rate futures are now tradable by all with the JIBAR futures contract introduced by the JSE. These futures contracts can be used to take advantage of expected moves in interest rates (up or down) or to hedge exposure to interest rates. This webinar ...read more |
10/28/2011 10:49:51 AM |
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| In the previous blog, we spoke about spread trading, as a strategy for traders to take positions on the expected change in SHAPE of the JIBAR futures curve. As an example we looked at the Mar12-Mar13 spread. The spread has moved from 114 bp (end Jun11) to 75 bp (end Sep11) and is currently trading at 40bp (27 Oct ...read more |
10/25/2011 2:47:35 PM |
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| A common trade used in the interest rate markets is a spread trade. This is used by traders looking to take positions on the expected change in SHAPE of the JIBAR futures curve. The trade involves taking a view on the spread between 2 contracts, hence the name. The two contracts can be any 2 points on the curve ...read more |
10/24/2011 11:12:15 AM |
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| The latest research on JIBAR futures has been released.
A JIBAR future carries information regarding the market's consensus of the level of the 3-month JIBAR rate, at a future point in time. A strip of JIBAR futures can be used to construct a short-term yield curve, which can in turn be used to measure short-term interest rate risk, as well ...read more |
10/20/2011 3:47:36 PM |
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| Access the review online here or by emailing interestrates@jse.co.za for a pdf copy.read more |
10/19/2011 12:27:00 PM |
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| The JIBAR futures closed out at 11am on 19 October 2011 with the 3-month fix at 5.575%. This has not been surprising as the rate has been largely unchanged (except for a few days in August) since the end of January 2011. The open interest was 1000 contracts. Note that, as usual, a new contract (April 2012), will be launched ...read more |
10/18/2011 12:41:33 PM |
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| The October 2011 newsletter has been released. Topics include:
• National treasury releases an “Interest Rate Strategy” policy paper
• ALBI index performance
• Review of 6 month performance of JIBAR futures
• Yield curve replacement project
The article on JIBAR futures discusses the move of the curve over the past 6 months and comments on how the curve displays interest rate expectations. To ...read more |
10/17/2011 11:59:18 AM |
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| The next expiry for JIBAR futures is Wednesday, 19 October 2011. The futures contract will be set at the level of the JIBAR fix determined at 11am on the expiration date. The methodology for the daily fix has been discussed in the blog entitled “What is the JIBAR rate?". The contract is a cash-settled contract so the cash ...read more |
10/11/2011 11:54:55 AM |
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| The JIBAR futures allow traders to take positions and hedge against short-term interest rate movements. Short-term implies the area of the yield curve out to 2 years. Hence the JIBAR futures are the markets’ expectations for the level of 3-month JIBAR at various points over the following 2 years.
• If interest rates expected to FALL, trader must BUY JIBAR futures...read more |
10/11/2011 11:33:02 AM |
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| The blog post is now also published over the twitter feed of the “JSE Derivatives” market at @SafexEDM. read more |
10/11/2011 11:05:56 AM |
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| The shape of the curve allows us to make the following comments on interest rate expectations:
1. JIBAR futures an efficient instrument to take positions on changing interest rate expectations
2. The short-end of the JIBAR futures curve (i.e.: contracts up to 1 year out) are trading very flat. They are trading about 25bp below the current JIBAR fix and ...read more |
10/4/2011 5:02:39 PM |
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| The JIBAR futures have a number of appealing characteristics:
• Interest rate prices now live, online and available to futures participants
• The contracts are standardised – the contracts are based on a fixed nominal size and fixed expiry dates. Trading in and out of positions becomes easy
• Futures are traded on-screen with market makers making prices throughout the trading period...read more |
9/29/2011 12:28:28 PM |
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| In order to promote JIBAR futures, the JSE has decided to make prices available on the website. Go to JIBAR futures product page and click on “JIBAR futures - prices”
Prices are also available via the normal data service providers.read more |
9/28/2011 12:04:37 PM |
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| The interest rate markets in South Africa have been dominated by over-the-counter (OTC) style trading. Within the OTC markets, the trading behaviour follows a quote-driven format where a client will phone a liquidity provider to obtain a two-way quote (bid and offer). This is very useful when clients require customised solutions as there is usually a level of detail that ...read more |
9/23/2011 11:03:57 AM |
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| By now, it is well known that the Monetary Policy Committee (MPC) decided to leave the repo rate unchanged at its September 2011 meeting. All eyes are now on the next MPC, which is scheduled for November 2011.
So what are the current interest rate expectations?
In general, the JIBAR futures contracts out to 1 year are trading between 15 ...read more |
9/21/2011 6:29:57 PM |
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| Short-Term-Interest-Rate (STIR) futures dominate the world of futures trading. In 2010, within the global Interest Rate Derivatives market, STIR derivatives accounted for 83% of the notional value traded (source: WFE/IOMA Derivatives Market Survey 2010 –May 2011). Of these derivatives, the most active contract in the world was the Eurodollar future, and for this reason, a South African ...read more |
9/20/2011 4:13:26 PM |
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| In the South African financial markets, JIBAR (Johannesburg Interbank Agreed Rate) is used as the barometer of short-term interest rate movements. JIBAR is an average rate (determined from borrowing and lending rates) that is independently derived from quotes obtained from a number of different banks for one, three, six and twelve month terms. In particular, the JIBAR 3-month rate ...read more |
9/20/2011 3:35:58 PM |
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| Welcome to the JIBAR futures blog / forum. The JSE has decided to promote interest rate products to the market by using technology to take the message to the market. Interest rate products have long been the domain of institutional traders and clients with little or no opportunity for retail clients to transact in this market. The nature of over-the-counter ...read more |