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Derivatives

Thai I-Rate Market Readies Flood Of Debt Issues

Derivative traders in Thailand expect a surge of hedging activity on the back a flurry of bond issuance which is about to hit the domestic market. "Everybody's getting ready to issue bonds," said a trader at Standard Chartered in Bangkok, noting that most international houses in Thailand have been lining up mandates. Market officials estimate that with possibly over USD1 billion in bonds expected to hit the market in late September and October, activity in the interest rate swap market will increase as many issuers will look to swap fixed rate baht deals into synthetic floating rate U.S. dollars. "This is exciting stuff," said a dealer at Citigroup, noting that so far this year issuance has been subdued as rates moved lower, with only a handful of deals so far.

"Rates are extremely low," said an official at Deutsche Bank. Traders continued that with rates recently falling to 1.25% on a 50 basis point cut following rate reductions in the U.S., corporates believe rates are bottoming out and are scrambling to issue debt.

In contrast, corporates in other Asian regions, such as Hong Kong, have been active over the course of the entire year, for example Hutchison Whampoa issued a EUR1 billion (USD1.15 billion) bond earlier this month.

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