Bank of America Hikes Swap Funding to 1,100 Bps Over SOFR, Caps New Trades
BAC•Bank of America raised swap financing costs for hedge funds betting on SK Hynix and Samsung shares to up to 1,100 basis points over SOFR and imposed new caps on trade sizes alongside peers like JPMorgan and Goldman. This tightening follows chip stock rallies of over 200% and may reduce swap trading volumes.
1. Banks Raise Swap Financing Rates
Bank of America joined Citigroup, JPMorgan and Goldman in increasing financing costs for equity swap positions on SK Hynix and Samsung Electronics. Rates were lifted to a range of 300–1,100 basis points above the secured overnight financing rate, translating to as much as nearly 15% annualized.
2. New Caps on Trade Sizes and Client Access
In addition to higher financing costs, BofA and several global banks have tightened limits on the size of new swap trades and are vetting client requests more rigorously, with some institutions even declining additional orders over the past two weeks.
3. Impact on Hedge Fund Strategies
These measures directly curb leveraged bullish wagers by hedge funds in Asia’s top chipmakers, potentially reducing swap volumes and boosting banks’ net interest spreads, though they risk driving clients to alternative financing providers.
4. Asia Chip Rally Spurs Risk Concerns
SK Hynix stock has more than tripled and Samsung Electronics is up beyond 175% this year, fueling the Kospi’s 100% surge. Recent share pullbacks intensified banks’ caution, prompting preemptive limits before the latest market setback.
