I’m going to be completely honest at the outset of this article. It is mainly conjecture. Educated conjecture to be sure but conjecture nonetheless.

Over the last few days, stories have started to emerge, principally in the FT that the scale of the so called “bond loop” or “mirror trades” might have been bigger than first thought. I think there are further clues in the Bruun & Hjejle report that help us to understand this.

There is a graphic in the report which I’ve shown previously:

Amongst other things, it shows that 23% of the funds (€46bn) came from Russia.

One of the reasons for the creation of the mirror trades was to enable safe, secure and relatively cheap access to foreign accounts for Russians who wanted to move their capital from inside Russia. It’s certainly a fact that, for the statements I’ve seen, I cannot recall identifying any incoming payments from Russian bank accounts (although that could have changed later on - I've only seen statements from 2007/08). What I have seen a lot of, and which rather mystified me up to now, are large FX credits. But what was generating those credits? Could it be an allocation from the bond loop?

There is certainly circumstantial evidence to suggest it was. In the FT report, there is the following paragraph:

Along with this one:

It is certainly true that the statements are full of FX payments coming in followed by “customer” payments (with contract numbers and references attached) going out.

Which looks awfully like what is being described above.

Which, if it’s true, means the mirror trades could have totalled as much as €46bn (which in 2015 would have amounted to something a little over $50bn). Of course, if the later statements show credits arriving directly from Russia, this total will be much less but, instinctively, I don't think they do.

Now I don’t know if this is right or not, but the FT calculates that the mirror trades in one year could have been as much as €8.5bn so, if they took place over a period from 2007 to 2014 this figure looks entirely reasonable.

It remains to be seen if I’m right or not.