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Risk signals in the over-the-counter (OTC) derivatives markets declined in the first half of 2021, according to new data from the Bank for International Settlements (BIS).

In a new report, the BIS said that while the notional value of OTC derivatives increased in the first half of the year, the gross market value — which represents a measure of risk — dropped 20% in the first six months.

The decline in market value was broad-based, the report said, with both interest-rate and foreign-exchange (FX) derivatives declining by more than 20%, and gross credit exposure falling 19%.

“These declines followed the sharp rises observed in 2020 amidst the pandemic-related market turbulence,” the BIS said in its report.

“Their return to near pre-Covid levels in mid-2021 coincided with a less uncertain macroeconomic outlook,” it added.

At the same time, the notional value of outstanding derivatives increased from US$582 trillion at the start of the year to US$610 trillion by mid-2021. However, the BIS said that this largely reflected seasonal patterns that have prevailed in recent years.

Additionally, the report noted that the VIX, an indicator of market sentiment, had returned to pre-pandemic levels by June 2021.