Irish Life & Permanent, Ireland's largest life assurer and mortgage lender with more than EUR40 billion (USD35 billion) under management, has entered an interest-rate swap in a punt that the sterling swap curve will flatten. Niall Boles, chief dealer in Dublin, said the group's proprietary sterling swaps book entered a GBP250 million (USD357 million, notional) two-year swap earlier this month, in which the company receives a 5.1% fixed and pays six-month LIBOR, which was 4.25% at the time it entered the contract. "We like the carry trade, we think the curve is quite steep at the moment because people are expecting rate hikes," he noted.
Boles declined to name his counterparty for the trade. He added that he put on the trade shortly after the U.K. government released data showing a rise in Britain's inflation, leading to speculation that the Bank of England's next move on interest rates will be up. "People are expecting rate hikes and it has affected the curve," he noted.
Moody's Investors Service rates Irish Life & Permanent A2 and Standard & Poor's has it at A plus. The bank also runs euro and dollar-denominated proprietary swaps trading books.
