As of 3pm today, some $12.8bn of ECP has been sold since the market open, in numerous currencies and from a wide array of issuers. Volume like that might tempt some to accord Standard Chartered's feat in reaching Rmb1bn in renminbi-denominated ECP sold out of London all the significance of a dewdrop in an ocean. That would be a mistake.
Much of the massive volume of ECP that is traded every day comprises rolled over trades, in familiar currencies, from familiar names. Standard Chartered reached its Rmb1bn figure in less than a month, from a standing start.
The bank is not alone in printing ECP and certificates of deposit in the currency, with BNP Paribas, Crédit Agricole and — less surprisingly — Industrial and Commercial Bank of China also selling renminbi-denominated paper in the last 12 months.
Banks — long the dominant player in terms of ECP volumes — have found themselves less in demand as investors have sought debt from sovereigns, supranationals and agencies. That financial institutions can quickly introduce and print new currencies such as renminbi, bringing new investors to the table as they do so, is a glowing reference for the adaptability of ECP as a product.
Total ECP and CD sold in 2012 stands at Rmb3.1bn, already tripling the total amount sold in 2011. All this has come despite troubled times for short term debt, as one of its traditional investor bases — money market funds — faces increasing regulatory burdens and, because of the actions of ratings agencies, a dwindling universe of supply.
In many ways, ECP is a market-leading product. It offers investors small, short-dated exposures, which they may be more comfortable with than 10 year benchmarks.
But other areas of the financial markets will have to become comfortable with renminbi products before renminbi ECP volumes can become truly large. An increase in European clients doing trade settlement with China is cited by Standard Chartered as one external factor that could help boost demand for renminbi ECP.
Events, decisions and forces of nature that are well outside the world of ECP will dictate when these changes take place. But it is reassuring for ECP investors, dealers and issuers alike to know that, while ECP may not change the world, it will be flexible and nimble enough to take advantage of those changes when they come.