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The Japanese Yen Interest Rate Swap Market Observed from OTC Derivative Transaction Data: the Impact of COVID-19

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Listed:
  • INOUE Shiori

    (Bank of Japan)

  • MIKI Shota

    (Bank of Japan)

  • GEMMA Yasufumi

    (Bank of Japan)

Abstract

Interest rate swaps are a type of transactions in which different types of interest payments are exchanged between two parties. They are actively used for a wide range of purposes such as hedges against interest rate risks and alternative investment vehicles to bonds. This report uses granular data of transactions in the Japanese yen interest rate swap market collected in Japan to review the developments in the market with a focus on transactions by sector of market participants. The analysis reveals transaction relationships between different sectors of market participants as well as the size and trends of net positions of new transactions that reflect their motivation for trading. The results suggest that there were significant changes in the market structure when international financial markets were significantly destabilized due to the COVID-19 pandemic in March 2020, as seen by, for example, the net positions of some sectors reversing from the average market structure.

Suggested Citation

  • INOUE Shiori & MIKI Shota & GEMMA Yasufumi, 2021. "The Japanese Yen Interest Rate Swap Market Observed from OTC Derivative Transaction Data: the Impact of COVID-19," Bank of Japan Review Series 2021-E-3, Bank of Japan.
    • Handle: RePEc:boj:bojrev:rev21e03
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