Passive income program shines in a volatile Q1

The first quarter of 2026 was anything but smooth for global markets.

Rising geopolitical tensions—particularly the escalating conflict in the Middle East—disrupted energy supplies and key shipping routes, sending commodity prices sharply higher and injecting fresh inflationary pressure into the global economy.

At the same time, investors were forced to navigate a complex mix of risks:

• stretched valuations across major equity indices,
• mounting concerns over increasingly leveraged AI spending,
• unclear timelines for returns on massive capital investments,
• persistent pressure on software and growth stocks, and
• growing fragilities in private credit markets.

This uneasy backdrop challenged the prevailing narrative of a soft landing and raised doubts about the sustainability of the rally seen in late 2025. As volatility picked up across asset classes—equities, rates and commodities alike—market participants became more tactical in their positioning.

The surge in uncertainty and price swings, however, proved supportive for securities lending activity, with increased demand for shorting and hedging strategies translating into higher lending revenues.

When markets become unpredictable, financial institutions ramp up activity.

Whether it’s hedging risk, facilitating market-making, executing arbitrage strategies or increasing short selling, the need to borrow securities rises materially in volatile environments. Balance sheets become more dynamic, trading desks more active and demand for specific names—particularly those under pressure or heavily traded—can spike quickly.

And with higher demand comes higher lending fees. Securities that are in short supply or in high demand can command significantly higher borrowing costs, creating attractive opportunities for long-term holders willing to lend out their assets.

This dynamic played out strongly in Q1. As volatility swept across equities, rates and commodities, borrowing demand increased, pushing lending revenues higher. 

To put that into perspective, total global securities lending revenues reached approximately $3.8 billion during the quarter. Against that backdrop, Swissquote clients delivered a notably strong performance, punching well above their weight and highlighting how periods of market stress can unlock additional sources of return.

In the EMEA region, equities lending revenues rose by 24% quarter-on-quarter. The performance was largely driven by resilience in energy and defence stocks, which benefited from geopolitical tensions, while consumer sectors lagged under pressure.

This divergence created fertile ground for lending opportunities, particularly in sectors where positioning and demand were most dynamic.

Several individual names stood out for their lending performance:

• Capital B emerged as a top contributor, with a lending rate of 87%, generating $176’000 in passive income for clients.
• Kalray, a French semiconductor designer, recorded the highest lending rate among the top ten at an eye-catching 623%. However, due to smaller lendable volumes, total income reached $32’000.
• Other notable contributors included Amoeba SA, Diginex Limited, SK Hynix and OC Oerlikon.

These figures highlight an important nuance: high lending rates don’t always translate into the highest income — availability and scale matter just as much.

Equities continued to dominate lending activity, accounting for 89% of all loans, while ETFs made up the remaining 11%.

Looking at geographic distribution:

• France led the way, generating nearly $400'000 in client income
• United States followed with $225'000
• Then came the UK, Germany and Switzerland 

The prominence of French-listed securities reflects both strong demand and favorable lending conditions in that market during the quarter.

Market conditions will always evolve—sometimes gradually, sometimes abruptly—but the core takeaway remains unchanged. Even in environments defined by shifting macro narratives, geopolitical shocks and rapid rotations across asset classes, portfolios can do more than simply sit idle.

For long-term investors who hold positions they do not intend to sell in the near future, securities lending provides a way to extract additional value without changing the underlying investment strategy, asset allocation or risk profile. The core exposure remains intact, while the portfolio quietly works harder in the background.

Securities lending is even more relevant in periods of heightened volatility, when demand to borrow securities tends to increase and lending fees can become more attractive. In other words, uncertainty in markets often translates into opportunity for those willing to participate in the Passive Income program.

Swissquote clients’ over $1 million in extra income in Q1 - simply by putting their existing portfolios to work through the Passive Income program - is a reminder that in modern markets, performance is not only about capital appreciation, but also about finding incremental sources of return within what you already own.

The content in this article is provided for educational purposes only. It does not constitute investment advise, financial recommendations or promotional material.