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Yields on U.S. short-term debt saw significant volatility in the month of October, with yields on the one month Bill climbing to levels not seen in over three years. As a legislative stalemate in the U.S. Congress delayed approval of the federal budget and the extension of the debt ceiling until October 16, the mid-yield for the 1-year bill climbed 26 basis points from 0.07% on October 1 to 0.33% on the 15th.

CDS: In the first half of September the industry awaited the outcome of the Federal Reserve meeting in the US on September 17. The expectation of the September start of QE tapering had been priced in to the markets, so it was a surprise when the Fed announced that they were now planning to “await more evidence that progress will be sustained before adjusting the pace of its purchases”.

Economic data released during August indicated signs of improvement in the U.S. and in parts of Europe.

July was a relatively volatile month for U.S. Treasuries. Investors witnessed the yield on the 10-year note climb to intraday high of 2.74% on July 5, which followed a strong jobs report that raised concern about the Federal Reserve possibly pulling back on its bond-buying program.

European credit default swap indices rallied during the first three weeks of July, with the iTraxx Europe index falling to 97.9 on 22 July – the first time mid-spreads have been below 100 since 28 May.

This article looks at the USD Interest Rate Swap volumes reported by CME and LCH in the five weeks post the June 10 mandatory clearing deadline.

Volatility again characterised much of June in the fixed income markets, which awaited with some anxiousness the Federal Reserve meeting on June 19.

News of a new stimulus programme from the Bank of Japan, the ongoing equity rally, and reports from Italy that a coalition government has been formed, ending two months of political uncertainty there, all resulted in a relatively positive mood in the European credit markets.

Reforming the global OTC derivatives market is one of the most critical aspects of reducing risk in the financial system, but harmonizing cross-border rules is proving a major challenge.

Government bond yields in the U.S. and Europe climbed significantly in the month of June.