New value in Korean bond/swap basis play?
Upheaval in the currency markets as a result of fears of protectionist action by a number of emerging market countries to defend their competitive positions has created a raft of threats and opportunities in the financial markets, including a new play on Korean basis swaps
Speculation during the past few days that the South Korean government may slap foreign investors in Korean Treasury bonds (KTB) with withholding tax - something from which they are currently exempt, while their onshore counterparts are not - has contributed to a sell-off of KTBs, according to market watchers. However, some dealers, such as France's Credit Agricole, believe the sell-off represents an opportunity to capitalise on the spread between treasury bonds and interest rate swaps
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