China to export yuan to BRICS

China is reportedly to begin extending loans in yuan to BRICS countries in another step towards internationalizing the national currency and diversifying from the US dollar.

­The Chinese Development Bank wants to sign a memorandum of understanding with the country's partners from BRICS group of developing countries on increasing yuan-denominated loans, while partners increase loans in their national currencies, The Financial Times reports, citing people familiar with the talks.

The move aims to increase trade volumes between the five nations and diversify from using the US dollar.

Brazil and South Africa were quick to react to the proposal, saying they expect the lending pledge to be included into a master agreement to be signed in New Delhi on March 29.

“We will discuss the creation of structures and mechanisms for lending in local currencies in order to maximize economic and financial transactions between the countries that are members of the accord,” Brazil’s development bank BNDES said.

China, with 54 per cent of its foreign reserves in US dollars, has been trying to diversify from the currency it believes will weaken soon and for a protracted period.

China agreed to use national currencies with Russia, Belarus and Japan for bilateral trade. The country also decreased its foreign reserves in dollars recently in favor of the Australian and Canadian currencies. +25 (25 votes)

Source: RT

IT'S OFFICIAL: ISDA TRIGGERS GREEK CREDIT EVENT IN UNANIMOUS DECISION

It's for real this time.

The International Swaps and Derivatives Association determined today that Greece's bond swap has triggered a credit event.

That will lead to payouts of credit default swaps—essentially, insurance contracts on holdings of Greek bonds under Greek law—that investors purchased to hedge against the risk of holding Greek sovereign debt.

While expected, this is the icing on the cake of the first developed market default in 60 years.

An auction related to outstanding CDS transactions will be held on March 19. The committee asks that any investor wanting to participate in the auction notify ISDA immediately.

Provocation of a credit event has been a contentious topic in Europe during the last few months. On one hand, sovereign CDS contracts are the only securities that allow investors to hedge and speculate directly against governments. Because the market is so opaque and because many financial institutions are on both sides of this trade, credit default swaps have compounded concerns about the contagion that would occur as a result of a financial shock.

While the market for Greek CDS is relatively small, some traders and officials had been fearful that a credit event was still not fully priced in, and could have some negative consequences.

Source: Business Insider