Current market conditions impacting hedges and debt
Silicon Valley Bank and Signature Bank were placed into regulator hands on Friday and Sunday, respectively. In the context of these developments and their associated impacts on market conditions, here are a few areas to note:
- The news of regulator intervention with these banks has had a significant impact on market conditions as it pertains to the transactions we execute on behalf of our clients. Generally, swap rates are down 50-100 basis points since Wednesday of last week. Bid-ask spreads and trade execution charges are likely to be elevated as dealers face greater difficulty in hedging their own books. Any hedges or other transactions you’ve been pricing have likely moved significantly in price and may continue to do so in the coming days. We’ll keep our clients up to date on these changes as we discuss live and potential transactions with them.
- We are in the process of contacting all clients with derivatives transactions in place with either of these banks and expect to complete this outreach by the end of the day. Should you have immediate questions, please reach out to your Chatham representative.
- Clients on our debt management system can use the software to see their loan exposure, if any, to these banks. Please reach out to us if you’d like help running reports.
We are actively analyzing information as it becomes available and will keep close dialogue with you as this situation develops and market conditions change. Don’t hesitate to reach out to your Chatham representative with any questions in the meantime.
Still have questions?
Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.
Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved.23-0060