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Industry roundup: 23 March

ARRC publishes progress report on transition from USD LIBOR

The Alternative Reference Rates Committee (ARRC) has released the 'Progress Report: The Transition from U.S. Dollar (USD) LIBOR', outlining key reference rate reform efforts, progress to date, and areas requiring further work. The report is motivated by the number and range of steps taken in the move away from LIBOR. It provides a comprehensive overview of the LIBOR transition, including a timeline of concrete steps taken in the transition, a table of remaining LIBOR exposures and data on the development of alternative markets. It also provides critical insight into where progress away from USD LIBOR will need to materially accelerate for the market to be adequately prepared.

"Today’s Progress Report underscores the tremendous progress made in transitioning away from US dollar LIBOR over the past year. However, it also identifies products, such as business loans, where the use of LIBOR has not diminished,” said Tom Wipf, ARRC chairman and vice chairman of Institutional Securities at Morgan Stanley. “The ARRC commends all efforts that contributed to progress to date, but time is short. With essentially nine months left to end-2021, it is critical that market participants are actively taking steps to support the transition using the tools available now."

In particular, the report covers progress since 2017, when the ARRC selected the Secured Overnight Financing Rate (SOFR) as its preferred alternative reference rate, in SOFR derivatives and cash markets. The report highlights the considerable uptick in SOFR trading activity over the course of 2020 in floating rate notes and consumer mortgage markets in particular. However, it also spotlights areas where progress has been slow. It includes updated data on outstanding exposures to USD LIBOR and shows that use of LIBOR has continued in some markets. Although an estimated 60% of current LIBOR exposures will mature before June 2023, an estimated US$90 trillion will remain outstanding - a fact that underscores the importance of finding solutions for legacy contracts. 

The report concludes by highlighting the ARRC’s 2021 Objectives and Priorities to support a smooth and efficient transition from LIBOR. 


Standard Chartered and Bloomberg partner of electronic trading workflow for Korea treasury bonds

Bloomberg and Standard Chartered have introduced an electronic trading workflow for Korea treasury bonds, enabling investors to access global and domestic sources of liquidity on the Bloomberg Terminal. Through Bloomberg’s Electronic Trading (ET) offering, investors can now stage, monitor, trade, process and allocate Korea treasury bond trades in a fully electronic workflow. The workflow allows for Korea’s Investor Registration Certificates (IRCs) to be captured and conveyed at each stage of the trade life cycle.

To mark this launch, the first fully electronic trade was successfully performed on Bloomberg between two major international participants in Korea treasury bonds – Standard Chartered and a global buy-side investor.

"Standard Chartered is one of the largest primary dealers in Korea treasury bonds and this enhancement by Bloomberg has brought about meaningful optimisation to our trading workflow," said Tony Hall, global head of Macro Trading, Financial Markets at Standard Chartered. "The growing adoption of electronic bond trading is an exciting step forward for the market. Initiatives like this greatly improve trading efficiency by automating manual processes and improving the flow of data."

The electronic trading of Korea treasury bonds on Bloomberg is now simpler and faster for foreign investors to access the local market. They undertake a one-time setup of IRC, which was previously sent manually on each trade request. Subsequently, clients can request quotes and communicate IRCs to multiple dealers on an integrated workflow, then seamlessly allocate the trade in a single submission.

"The benefits of adopting a fully electronic trading workflow are well understood by dealers in the Asia-Pacific region," said William Oberuch, global head of Emerging Market Trading at Bloomberg. "As global markets become increasingly connected, it is even more important that market participants find seamless ways of accessing liquidity and sourcing market interest. Fully electronic trading platforms bring greater trading efficiency, more seamless workflows and lower transaction costs."


France issues €7bn green bond to scale up climate action

By becoming a pioneer of sovereign green bond issuance in 2017, France confirmed its role as a driving force for the implementation of the Paris Climate Agreement goals. France's green bonds (Green OAT) fund expenditure by the government and by the 'Invest for the Future' programme to combat and adapt to climate change, protect biodiversity and fight pollution.

The eligible green expenditure that the state's 2021 green bond issuance finances will amount to €15bn, close to double that in 2019 - a sharp rise largely explained by state support for renewable energies. This acceleration is facilitated by the issuing of France's second €7bn Green OAT which matures in June 2044. The order book was almost 5 times oversubscribed, and around €4bn of the €7bn issued have been allocated to green investors. 

BNP Paribas was chosen by Agence France Trésor to be joint lead manager for this benchmark issue, and Yann Gérardin, head of BNP Paribas Corporate and Institutional Banking, said: "France's new green bond bears witness to the country's leadership in the necessary acceleration of the energy transition, and especially to the state's support for renewable energies."

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