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Rising interest rates drove a surge in the market value of over-the-counter (OTC) derivatives, according to new data from the Bank for International Settlement (BIS).

The gross market value of OTC derivatives rose by 13% in the second half of 2022 to $20.7 trillion (all figures in U.S. dollars). It was the highest market value in six years for the investment class.

BIS reported that interest-rate derivatives led the increase in market value.

“As market rates rose above the rates prevailing at the start of [rate-derivative] contracts, their gross market value increased,” it said.

Gross credit exposure increased by 11% in the second half of 2022 to $3.7 trillion. However, the notional value of outstanding derivatives remained largely unchanged, BIS said.

Alongside the rise in interest rates, the reform of financial benchmarks — namely the move away from the London Interbank Offered Rate (LIBOR) to alternative rates — has affected the mix of derivative instruments, it noted.

Specifically, forward-rate agreements in major currencies affected by the LIBOR reform, including the British pound, yen and Swiss franc, have “all but disappeared,” it said, adding that the use of dollar-denominated instruments are down notably.

BIS also reported that the gross market value of commodities derivatives was impacted by the commodity price action in 2022.

The market value of commodities derivatives surged in the first half of 2022, and then fell by 45% in the second half to $486 billion, as food and energy prices retreated. The notional value of commodities derivatives also fell by 24% to $1.5 trillion.