Hong Kong's interest rate swap curve has stretched out to 15 years in the interbank market in recent weeks on the back of increasing structured note issuance in search of higher yields. "There's more demand for longer tenor products--the curve is extending well beyond 10 years," said Chester Kam, managing director and head of Asian rates trading at JPMorgan in Singapore.
Derivative players were looking to launch a 15-year interdealer market last year following the launch of 12-year contracts (DW, 9/24) but were held back due to falling liquidity in the front end. But with investors willing to take on long-term plays as well as the prospect of greater corporate issuance for later maturities a 15-year curve is developing. "This should only improve liquidity," said a trading head at a European house, noting that derivative houses have been warehousing 15-year swaps since last year and will now be able to trade and provide two-way pricing.
