Fixed-income derivative shops in Hong Kong are anticipating the launch of a 15-year government benchmark bond in the coming months, which is expected to boost trading in longer-dated interest-rate swaps. "This will help increase liquidity in the longer end of the swap curve," said a senior rates trader at a bulge bracket house.
The Hong Kong Monetary Authority is discussing adding a 15-year Exchange Fund Note to its existing program, which extends out to 10 years. The new issue--expected by year-end--would boost the depth of the domestic fixed-income market. With a benchmark reference rate in place, the trader expects trades in 15-year swaps to take off. The first 15-year swap was launched in the interdealer market back in 2004 (DW, 5/9/04) but activity has mainly been limited to 10- versus 15-year curve plays rather than outright positions.
Hing-Fung Wong, spokesman at the HKMA, said it has been in consultation with market participants regarding a possible bond launch and is now finalizing the feedback received, declining further comment.