Negative Eonia rate causes CSA headaches

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Eonia rates are now negative

With the key Euro Overnight Index Average (Eonia) rate turning negative in August, dealers are looking for clarity on how to treat interest paid on cash variation margin referencing the rate, particularly for transactions where only one party is required to post collateral. Differing views about whether a 0% floor exists have also led to concerns about potential basis risks.

Credit support annexes (CSAs) to International Swaps and Derivatives Association derivatives agreements, which spell out h

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