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| Originating department: | Risk Management |
| Company Circular No: | LCH.Clearnet Ltd Circular No 2827 |
| Service Circular No: | RepoClear: 164 |
| Date: | 07 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 Portuguese government debt against a AAA benchmark, LCH.Clearnet Ltd has revised the risk parameters for Portuguese government bonds cleared through the RepoClear service. The margin required for positions of Portuguese government bonds will consequently be increased by an additional 15% 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 8 April 2011.
For further information please contact either Tom Chapman ([email protected]) +442074266338 or Lianne Arnold ([email protected]) +442074267376