S&P securities lending indices report significant drop
14 January 2011 New York
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All three Standard & Poor's securities lending indices saw borrow spreads reach their lowest levels since 2009.
The December indices showed utilisation down 19 per cent, along with a 29 per cent drop in the opening benchmarking lending rate on the last day of the year.
During the fourth quarter, the S&P 600 Securities Lending Spread Index (down 40 per cent) and the S&P 400 Securities Lending Spread Index (down 57 per cent) indicated that small and mid cap US equities were loaned at average spreads of 17 and nine basis points respectively.
The spread versions of the indices are calculated by subtracting an index’s aggregate securities lending rebate rate from the Federal Funds Open Rate. After averaging a spread of one basis point in the first nine months of 2010, the S&P 500 Securities Lending
Spread Index was negative throughout December and the majority of Q4.
Given the low federal funds target rate (0-25 bps), as the aggregate rebate rate for the S&P 500 Securities Lending Index increased throughout Q4, spreads against the benchmark funding rate turned negative for the large cap index.
The December indices showed utilisation down 19 per cent, along with a 29 per cent drop in the opening benchmarking lending rate on the last day of the year.
During the fourth quarter, the S&P 600 Securities Lending Spread Index (down 40 per cent) and the S&P 400 Securities Lending Spread Index (down 57 per cent) indicated that small and mid cap US equities were loaned at average spreads of 17 and nine basis points respectively.
The spread versions of the indices are calculated by subtracting an index’s aggregate securities lending rebate rate from the Federal Funds Open Rate. After averaging a spread of one basis point in the first nine months of 2010, the S&P 500 Securities Lending
Spread Index was negative throughout December and the majority of Q4.
Given the low federal funds target rate (0-25 bps), as the aggregate rebate rate for the S&P 500 Securities Lending Index increased throughout Q4, spreads against the benchmark funding rate turned negative for the large cap index.
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