The Kiwi dollar interest rate derivatives market has seen its highest volumes since the mid-1990s in recent weeks as foreign corporates have turned to the currency to issue debt. Mark Currie, head of interest rate trading at Deutsche Bank in Auckland, predicted interest rate swap volumes could surpass last year's levels by 50-100%. He noted that eurobond issuances for the first quarter of last year was around NZD500 million and there has already been over NZD800 million in issuance half way through the first quarter this year.
"It's a weak U.S. dollar story," said Deutsche Bank's Currie, attributing the increased interest to the strengthening Kiwi dollar which is driving an interest rate differential versus greenbacks because New Zealand has higher interest rates. A trader at Westpac Banking Corp. said overseas borrowers have been issuing Kiwi dollar-denominated bonds and then converting them back to their home currency.
Recent Kiwi-denominated bonds include a NZD100 million issue by the Nordic Investment Bank, which the firm converted into a synthetic floating rate obligation, according to Samu Slotte, senior funding officer in Helsinki. Slotte declined to name the currency it converted the bond into, but said it converts all debt into dollars, euros or one of the Nordic currencies.
