• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Interest in Derivatives on the Up

0
  • by Editor
  • in Treasury
  • — 3 Nov, 2011

Delegates at today’s CIPFA Treasury Management Seminar heard an anecdote about a local authority (LA) finance team who issued a bond and then crossed their fingers and prayed the markets didn’t go against them in the few hours between issue and pricing. A volatile market, not unheard of these days, could have cost them dear.

It’s the kind of story that usually gets LAs into hot water but in this case, the act of mitigating the risk they were exposed to for that brief time, would probably have attracted far worse publicity. Using derivatives, while commonplace for many corporate treasurers, remains an emotive subject for LAs and the ghost of Hammersmith & Fulham’s one-way bet on interest rate swaps in the late 80s, always makes its presence felt.

It seems though that CIPFA has received its fair share of enquiries recently from LAs who would like the option, no pun intended, of using derivatives for the purpose of hedging risk. Alison Scott, Assistant Director Local Government of CIPFA announced a series of “high-level principles” at today’s conference as a precursor to “something more practical in the near future.” Making any derivatives use part of the Treasury Management Strategy and “setting clear parameters” were top of the agenda.

Despite CIPFA’s willingness to engage in the subject, Birmingham City Council’s Martin Easton, currently working on the much anticipated CIPFA Risk Toolkit was quick to urge caution: “no one should go away thinking – hooray – we can start using derivatives now”.  Scott advised delegates to explore their legal position by referencing the judgment of the Hammersmith & Fulham case and concluded by making clear that the use of derivatives for the purpose of speculation was banned.

Share

You may also like...

  • Councillors should spend more time with 151 officers Councillors should spend more time with 151 officers 3 May, 2017
  • Aberdeen prepares for new funding model with Moody’s rating Aberdeen prepares for new funding model with Moody’s rating 12 Oct, 2016
  • Pros & Cons of Sharing Treasury Services Pros & Cons of Sharing Treasury Services 20 Oct, 2011
  • MHCLG ‘concerned’ over councils’ investment code compliance MHCLG ‘concerned’ over councils’ investment code compliance 26 Mar, 2019

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 13 hours ago

    Could 2021 be less eventful for LGPS, please?: Barry McKay looks at McCloud, the 95k exit cap, employer risk and investments to see what to expect for LGPS in the coming year. On one hand, 2020 was in[...] dlvr.it/RtslFd pic.twitter.com/H4debuPmGG

    Room151 13 hours ago

    Fixed income investing can help target both financial and sustainability targets: Sponsored article: Adam Whiteley offers a guide to the ESG benefits of investing in fixed income. Investing responsibly in fixed income can be crucial for local government… dlvr.it/Rtsl9h pic.twitter.com/khJL1xNfGh

    Room151 2 days ago

    Going beyond the standard metrics for climate change: Sponsored article: With climate change an investment imperative and an imminent reporting requirement, Ritesh Bamania argues UK pension schemes should look beyond today’s standard metrics. With… dlvr.it/RtnpLS pic.twitter.com/6ABaFHyS9I

    Room151 3 days ago

    LGPS webinar: Governance the key to TCFD implementation: LGPS funds have been warned that governance is it at the here of Whitehall plans to impose a new climate reporting regime on pension funds. In January the Department for[...] dlvr.it/RtjwNq pic.twitter.com/YMiMdmRyzU

    Room151 3 days ago

    LGPS webinar: Central bank management of bond purchasing could affect all asset classes: When the government debt caused by the pandemic is eventually tackled there may be a huge impact on assets of all classes, according to a leading investment expert… dlvr.it/RtjwJx pic.twitter.com/7v8K5vMYHo

    Room151 3 days ago

    #LGPS readers...what to do about #bonds? room151.co.uk/blogs/lgps-web… @BrunelPP 's new CIO, David Vickers tackles a problematic area #centralbanks #assetallocation #fixedincome pic.twitter.com/yUJr0azbKv

    Room151 3 days ago

    LGPS Challenges: Balancing Realpolitik and responsible investment: Elizabeth M. Carey warns of the perils of an ESG echo chamber as countries outside the West continue to invest in fossil fuels. Anyone working with the LGPS probably feels[...] dlvr.it/RtjMpq pic.twitter.com/MykIYxuYri

    Room151 6 days ago

    How can local government ‘build back better’?: Beverley Gower-Jones looks at the options for driving small business entrepreneurship in clean technologies. Innovation is essential for local authorities to save money and reduce emissions, it is the… dlvr.it/RtT3nS pic.twitter.com/bSMB6OG70t

    Room151 7 days ago

    Helen Randall: Spelthorne report places spotlight on ‘controls’: Fresh criticism of Spelthorne Council raises the question of what “good” controls look like when negotiating a property deal. Spelthorne Council’s continuing debacle over property… dlvr.it/RtSPhy pic.twitter.com/9uCOJgBcH6

    Room151 7 days ago

    Step-out strategies: Hitting the sweet spot between liquidity and ultra-short duration: Sponsored article: Jemma Clee describes how an ultra-short duration strategy can help local authorities enhance returns. Despite the expectation of a low, and… dlvr.it/RtSPZb pic.twitter.com/pdXPpv5lcN

    Room151 1 week ago

    What role will climate change have on the pricing of government bonds?: Sponsored article: Kerry Duffain finds that “vulnerability and resilience to climate change” have a significant impact on the cost of government borrowing. Ardea Investment… dlvr.it/RtNKv7 pic.twitter.com/wDjT31x4Yt

    Room151 1 week ago

    ESGenius: Slashing emissions will fuel green growth for decades: Sponsored article: Velislava Dimitrova argues that a big enough investment could mean transition to a low, or no, carbon economy can become a reality. The world needs to slash carbon[...] dlvr.it/RtKZJp pic.twitter.com/cd8S3ijERl

    Room151 1 week ago

    Prudential code: “Not perfect, but its heart is in the right place”: The new Prudential Code offers revised rules for borrowing. Nikki Bishop is sceptical it will work while Gary Fielding offers his support. Nikki Bishop I have been asked to give[...] dlvr.it/RtKZFh pic.twitter.com/OriN28lXcb

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story CIPFA Conference Goes Big On Bonds
  • Next story Autumnal Lessons in Credit Risk

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.