UMC sells exchangeables with negative yield

The exchangeable bonds into Unimicron and Novatek carry a negative 0.5% annual yield, which is made possible by an asset swap covering virtually the entire deal.

Taiwan semiconductor company United Microelectronics Corporation UMC created a stir in the markets yesterday with two zero-coupon exchangeable bonds that were both offered at a negative yield. According to bankers, such a feature, while used previously by issuers in Taiwan and Hong Kong, hasn't been seen in Asia since early 2004 at least.

However, after the initial scepticism, investors were happy enough to buy the bonds, helped by UMC's relatively strong credit and the fact that sole bookrunners Credit...

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