Change in EUR benchmark interest rate from EONIA to €STR for cash deposits

Report date

Thu, 18/06/2020

Summary

Circular No.	LCH Circular No 4098
Date:	18th June 2020
To:	All LCH Clearing Members

Body

Dear Clearing Member,

Following the decision of the ECB euro risk-free rates working group on the replacement of the euro overnight index average (EONIA), LCH is pleased to announce a switch to using the €STR (Euro Short Term Rate) benchmark from 27^th July 2020 for EUR cash deposits.

The switch to using €STR will be in line with the July confirmation of LCH interest rate spreads due to be announced on 20 July 2020 and effective from 27 July 2020. At this point LCH will no longer use EONIA and will instead use €STR.

The table below illustrates the indicative change to spreads when €STR becomes effective. LCH is not seeking to alter the absolute spread as a result of using the €STR benchmark.

LCH Spreads	Current benchmark and spread	New benchmark and spread from 27^th July 2020
LDR	EONIA minus 58bps	€STR minus 49.5bps*
FCM LDR	EONIA minus 30bps	€STR minus 21.5bps*
RDR	EONIA minus 58bps	€STR minus 49.5bps*
CDR	EONIA minus 30bps	€STR minus 21.5bps*
Default Fund RCL	EONIA minus 20bps	€STR minus 11.5bps*

*Indicative spread subject to change in July 2020 Spread and Accommodation Review.

This change is independent of the benchmark used for EUR interest rate swaps cleared through SwapClear.

Questions on the change of the deposit rate should be addressed to:

CaLMfrontoffice@lch.com

Kind regards,

LCH