Derivatives may have driven Bund Tantrum in Spring 2015

Bloomberg, citing the Bank for International Settlements Quarterly Report from December 2015, said:

The rout in euro-area sovereign-bond markets in April and May that shook markets around the world may have had its roots in derivatives.

The probable cause was a rush by investors in preceding months, when securities prices were rising, to protect themselves against falling yields using swaps, according to the Bank for International Settlements. The cost of options to enter a swap contract on a future date — to fix a rate of payment — rose by a factor of three from early 2015 to April 20, as 10-year swap rates declined, the BIS report said.

The Bloomberg article is here.

The BIS Quarterly Review is here: http://www.bis.org/publ/qtrpdf/r_qt1512.htm

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