BISness Media briefing on the BIS Quarterly Review, December 2025
Dec 12, 2025
Hyun Song Shin, Economic Advisor at the Bank for International Settlements, leads a discussion joined by Gaston Gelos and Frank Smets. They delve into the December 2025 BIS Quarterly Review, highlighting market volatility and rising FX turnover. Shin explains how US short-term rates impact hedging strategies and examines gold's unusual rise alongside equities. The trio also discusses the implications of emerging market derivatives growth and private credit defaults, raising concerns about market fragility amidst speculative behaviors. Watch out for insights on AI investment and the dollar's future!
AI Snips
Chapters
Transcript
Episode notes
FX Markets Held Up During April Volatility
- Despite concerns about dealer internal liquidity pools, FX markets functioned normally in April.
- BIS finds market structure and decentralization held up during the volatility episode.
Hedge Funds Absorb Rising Sovereign Supply
- Government bond issuance rose sharply and hedge funds have become marginal buyers to absorb supply.
- Hedge funds use leveraged long bond positions hedged via futures or swaps, fueling surge in interest-rate derivatives turnover.
Swap Trades Amplified US Treasury Exposure
- Hedge funds' Treasury exposures more than doubled since 2022 largely via swap trades.
- Shin links the April stress episode to widening spreads in that part of the market.