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 reduced from 45% to 35% for long positions; this amount will be adjusted for the current bond price*.  Short positions will pay a proportionately lower margin.

1. 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.

2. The additional margin will be reflected in a margin call/repayment on Friday 27 January 2012.

3. For further information please contact Tom Chapman ([email protected]) +442074266338 or Lianne Arnold ([email protected]) +442074267376 
    

 
Chris Jones
Executive Director and Head of Risk Management
 

* The impact of bond price can be material. For example, a 35% multiplier applied to a trade with a current price of 70 would be approximately 22% of nominal value.