First non-deliverable RMB rate swap traded

HSBC and Standard Chartered Bank have traded what they believe to be the first renminbi (RMB) non-deliverable interest rate swap transaction. The RMB100 million ($12.5 million) transaction has a three-year tenor and involves Standard Chartered paying a fixed rate of 3.09%, in return for a floating rate paid by HSBC. The trade was brokered by Nittan Capital Asia.

“The RMB non-deliverable interest rate swap has been developed by the Treasury Markets Association (TMA) to match the needs of the market, since various investors and corporates have interest exposure in China but may not have the required entity to access the onshore market,” said Michael Bass, global head of rates and foreign exchange at Standard Chartered in Singapore, in a statement. 

The TMA’s market and product development committee, chaired by HSBC’s head of global markets for the Asia-Pacific, Anita Fung, proposed development of the non-deliverable RMB interest rate swap in May 2006. “We held our first technical workshops last week to promote the product, and already the first two transactions have been conducted.” Fung added in the statement.

Currently, the onshore seven-day repo and the one-year People’s Bank of China deposit rate are the only benchmarks for non-deliverable RMB interest rate swaps. The TMA is currently developing a swap offered rate with the aim of delivering this to the market by November.