Dim sum bonds offer borrowers arbitrage opportunity

With swaps in their favour, more foreign borrowers could be encouraged to tap the market, though dim sum bonds are showing signs of stress following a possible breach of covenants by Global Bio-chem.

Dim sum bonds offer borrowers arbitrage opportunity

Hyundai Capital and IFC both tapped the dim sum market this week, taking advantage of the arbitrage opportunity while swaps are in their favour.

The basis swap, which in the dim sum market refers to the cost of converting fixed-rate offshore renminbi to floating-rate US dollars, touched a historical high of 250bp for the three-year tenor on Monday. A higher basis swap makes it favourable for a borrower to issue in offshore renminbi and swap...

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