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Securities Lending Market Report | March 2022

>>> Asia Pacific >>> Emerging Markets >>> Corporates

Fig 4 - FIS Across 2021, higher-graded sovereigns saw more pressure Oil producing sovereigns, airlines and car companies
generally on fixed incomes than lower-graded countries. remained a principal focus of short demand early in 2021,
APAC Securities Lending Government Bond Market The core versus peripheral Europe spread slowly grew before fading out as the year went on. There was a late
wider as the year passed. What is interesting though, rise in corporate bond activity, particularly in the property
Total Lendable Assets (Billions €) 230 132 On-Loan Value (Billions €) general spreads synchronised with Fed expectations. South saw a number of issues across the curve dealing in very
sector, as some Chinese real estate companies looked to
is that on a macro basis, we started to see higher beta
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emerging market demand towards the end of the year, as
raise capital to repay creditors. In Q4, China real estate
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deep negative territory. General revenues in corporate
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Africa, Russia and Poland collateral all increased in demand
through the year.
bonds were limited through the majority of 2021, as the
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low interest rate environment created a depth of capital
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raisings and supply that acted to remove special situation
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interest rate tightening, we are likely to see a reversion to
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a more traditional repo market soon, which will act to drive
Jan 2021 Feb 2021 Mar 2021 Apr 2021 May 2021 Jun 2021 Jul 2021 Aug 2021 Sep 2021 Oct 2021 Nov 2021 Dec 2021 opportunities in general out of the market. With upcoming
spreads upwards.
Total Lendable Assets On-Loan Value
At HSBC, we saw clients direct flow to Asia, which Despite their continued use in repo markets, JGBs continue
arguably recovered faster at the height of the pandemic to be largely immobile due to classification at many banks
than other regions. This asset flow towards higher as 2nd tier HQLA. Similarly, for many of the local markets,
spread and yielding markets has seen our clients’ returns there has been a shift in borrower behaviour and collateral
increase significantly from lending over this past year. demand using local assets, as these markets tend to be
These markets have a deep pool of specials bonds that structurally harder to mobilise.
are in heavy demand and subsequently a lot of pressure China bond-lending is becoming increasingly discussed
on security lenders and real money holders of these amongst foreign investors due to increases in country
bonds to make them available to lend. With the sell-off weightings however regulations and operational structure
in government bonds and repricing of the curve into Q4 currently limits lending activities. There is much to watch
2021, specific issues have been trading special across out for here when this market finds traction.
many markets with Australia being among the most
popular in H2.