Merrill Lynch is considering launching high-yielding structured bonds next year in India, as an alternative to the traditional products available in the market. Jayesh Mehta, head of debt in Mumbai, said the firm is looking at structuring corporate bonds with additional upside optionality triggered by interest rates.
"This is something we have in the pipeline," noted Mehta. As rupee-denominated interest rate options are not anticipated to be permitted until later next year, Merrill would use interest rate swaps as an alternative way to exchange cashflows if a specified rate level is triggered. While still in the conceptual stage, Merrill will likely first enter such transactions with issuing clients directly via prop trades to prove the feasibility. If the concept takes off, it will begin offering the deal to such investors as bond fund managers, potentially within six months.