Norddeutsche Landesbank, a regional bank for the German states of Lower Saxony, Saxony-Anhalt and Mecklenburg-Western Pomerania, has entered an interest rate swap on a recent EUR1 billion (USD1.07 billion) bond offering to convert it into a floating-rate liability. Thomas Hofermann, syndicate manager at the bank in Hanover, said it entered the swap because it did not want to carry the interest rate risk for the 10-year maturity for the bond. The bank does not convert all fixed rate issues.
In the swap, Norddeutsche pays a Euribor-based rate and receives the 4.5% coupon on the bond, according to Hofermann. The bank executed the transaction internally with its own swap desk, but also uses external counterparties, according to Hofermann.
Pricing is the most important factor in choosing counterparties, said Hofermann.
