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Singapore I-Rate Market Plans Jump Into Exotics

Firms in Singapore are planning to boost the range of interest-rate derivatives products they offer to include constant-maturity swaps and swaptions. The expansion beyond plain vanilla swaps is part of the coming of age of the Sing mart and the development of a fixed-rate benchmark, according to traders. One trader estimated 10-15 exotic products will have been traded by year-end from almost zero today.

Mike Pieri, director of local currency fixed-income trading at UBS Warburg in Singapore, said a fixed-rate benchmark is now being established, where 12 to 14 banks will give their bid and offer rates on the swap curve for maturities ranging from one to 15-years and an average will be published. "The market is evolving to an level where liquidity has risen high enough for people to start looking for the next products," added Pieri.

The Singapore Foreign Exchange Market Committee is discussing how to set up this fixed rate benchmark. Bryan Yap, Asian head of interest-rate swaps at Deutsche Bank in the Lion City and chair of the interest-rate committee at the SFEMC, said "we'll look to get this started by year-end." Edmund Ng, v.p. of interest-rate trading at J.P. Morgan in Singapore, added that the infrastructure needs to be built first. He continued that the firms also need to find a consensus on the trading methodology.


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