The Bank for International Settlements released the latest version of its Quarterly Review today, reporting continued growth in the worldwide derivatives markets this year.

Trading on the international derivatives exchanges accelerated in the first quarter of 2007, the BIS said. Combined turnover of interest rate, currency and stock index derivatives increased by 24% to U.S.$533 trillion in the first quarter, after declining by 7% in the previous one, it said. Activity was strong across risk categories with the exception of commodities. Heavy trading during the turbulence in international financial markets in late February and March boosted growth in the equity (33%) and foreign exchange (26%) segments, the BIS added. Activity in interest rate derivatives also increased (22%), but primarily due to seasonal factors.

Growth in the over-the-counter derivatives market reverted to a pace in line with the long-term average in the second half of 2006, the BIS noted. Notional amounts increased by 12% to U.S.$415 trillion at the end of December, after rising 24% in the first half of the year. Growth remained very strong in the credit segment (46%), but fell to rates in the range of 5% to 11% in other risk categories.

It also reports that net issuance in the international debt securities markets was subdued in the first quarter of 2007, declining by 2% to U.S.$866 billion. In the advanced economies, strong net issuance in the UK was offset by declines in the U.S. and euro area. Robust borrowing in the UK was mostly driven by the activity of issuers located there but whose parent company is domiciled abroad. In emerging markets, banks were the busiest issuers, with borrowers from emerging Asia and Europe being much more active than in the past.

In the international banking market, total cross-border claims expanded by U.S.$1 trillion in the fourth quarter of 2006, the result of a pickup in interbank claims and a surge in credit to non-banks. Credit to offshore financial centres continued to grow at a brisk pace, as did credit to borrowers in emerging economies, it reported. At the same time, residents of emerging economies placed even more in deposits in BIS reporting banks. Deposits by OPEC member states, while largely in dollars, were placed primarily with banks located in Europe and in offshore centres.

The BIS consolidated banking statistics also show a noticeable rise in foreign claims on U.S. residents in the fourth quarter of 2006. Claims on residents in emerging Europe were up as well, while the growth in claims on residents of Asia–Pacific was more subdued. On an ultimate risk basis, reporting banks modestly raised their share of foreign claims on emerging market borrowers, especially those in Latin America. Cross-border flows into Korea and Thailand appeared to slow, although the share of these countries in total claims did not fall.