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| Originating department: | Risk Management |
| Company Circular No: | LCH.Clearnet Ltd Circular No 2824 |
| Service Circular No: | RepoClear: 163 |
| Date: | 01 April 2011 |
| To: | All RepoClear Clearing Members |
Management of Sovereign Credit Risk for RepoClear Service
Dear RepoClear Member,
In accordance with the Sovereign Credit Risk Framework and in response to the yield differential of 10 year Irish government debt against a AAA benchmark, LCH.Clearnet Ltd has revised the risk parameters for Irish government bonds cleared through the RepoClear service. The additional margin required for positions of Irish government bonds will consequently be increased from 35% to 45% for long positions; this amount will be adjusted for the current bond price*. Short positions will pay a proportionately lower margin.
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 Credit Risk Framework.
The additional margin will be reflected in a margin call/repayment on Friday 1 April 2011.
Report 74 (available on the LCH.Clearnet Member Reporting website) will detail any further changes in the margin levels charged under this framework.
This circular supersedes circular LCH.Clearnet Ltd Circular No 2815 dated 24 March 2011.
For further information please contact either Tom Chapman ([email protected]) +442074266338 or Lianne Arnold ([email protected]) +442074267376