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Screenshot of a breaking news alert e-mail from Q2 2017
Post trade infrastructure provider TriOptima, part of ICAP plc (LON:IAP), announces today that 18 banks participated in the first triReduce inflation swap compression cycle eliminating $98.5 billion notional in inflation index swaps for the European Union: EUR- Excluding Tobacco-Non-revised Consumer Price Index.
Given that inflation swaps tend to be long dated with compounding coupons leading to heavy final cash payments, eliminating them cuts capital costs and improves the leverage ratio, main goals of participating firms. TriOptima aims to execute triReduce British sterling (GBP) and US dollar (USD) inflation swap cycles, and will keep running euro cycles with additional indices including the French FRC- Excluding Tobacco Non-Revised Consumer Price Index.
Long-dated inflation swap compression also appeals to TriOptima’s insurance company clients and their pension fund affiliates who use triReduce to compress interest rate swaps and who feel the impact of the new capital requirements imposed by the European Solvency II regimes.
Peter Weibel, CEO of triReduce, said,
“triReduce is always looking to enhance the services we offer to our customers, who continue to look for ways to reduce their balance sheet outstanding notional assets, and their capital costs. The addition of inflation swap compression demonstrates TriOptima’s ongoing innovation and creativity in tackling these more difficult transaction types, which include cross currency swaps and FX forwards, and in delivering an efficient and effective solution.”
You can view the full announcement from ICAP by clicking here.