HSBC recently entered what is believed to be the longest-dated rupee interest-rate swap, and the transaction could open the way for further deals. Tarun Mahrotoi, treasurer in Mumbai, said HSBC entered a INR250 million (USD5.3 million) swap with a local manufacturing firm looking to diversify its liability portfolio. In the swap the corporate receives a floating rate based on the yield of one-year Government of India bonds, which is annually reset. At present the yield to maturity is 8.44%. Mahrotoi declined to name the corporate.
A swapper at a firm in Mumbai believes HSBC is going out "on an arm and a leg" to offer such a deal at this time since the corporate bond yield curve does not extend this far. This would make pricing on the swap difficult to calculate, he added. The swapper believes HSBC may be a year ahead of the market for deals of this tenor.
Another rival banker expects the deal to boost liquidity. He added that as the credit quality of customers improves, longer-dated swaps will become more common.
HSBC's Mahrotoi also noted that activity in three and five year rupee interest-rate swaps has been growing in the last few months. "I reckon [volumes have] nearly tripled in the last six to eight months," he added.
