Derivs - FX

In this round-up, the Shanghai-Hong Kong Stock Connect see steady volumes on its southbound channel, the Sino-German exchange in Frankfurt marks its first six months and HKEX offers new details on its expanded RMB futures. Plus, a recap of GlobalRMB’s top stories this week.

A recent flurry of developments related to Chinese offshore and onshore bond markets, coupled with a burgeoning (but not yet flowing) pipeline of Panda bonds is sparking talk that the next great leap forward for cross-currency basis swaps is within touching distance, writes Roger James of Total Derivatives.

Communication between foreign exchange market participants remains essential, the Bank for International Settlements said on Thursday, as it published a global code of conduct aimed at restoring confidence that the market can be “robust, fair, open, liquid and appropriately transparent”, despite recent scandals.

OTC Clearing Hong Kong (OTC Clear) is set to provide clearing services for cross-currency swaps (CCS) by the end of the year as it banks on the city’s status as a premium offshore renminbi hub.

EBS BrokerTec, ICAP’s electronic foreign exchange and fixed income business, has added FX spot, forwards and swaps to its EBS Treasury platform as it completes the rebranding of the product from its previous name, MyTreasury.

Equity and currency derivatives markets were ill-prepared for any major policy changes coming out of the G7 meeting this week, with prices reflecting low expectations of volatility. But even as the first day's session on Thursday passed without shocks, there was a growing sense that Friday could bring a bigger showdown.

The Hong Kong Exchange (HKEX) has announced the launch of the first RMB global currency index, with a new line of RMB currency futures approved for take off on May 30.

The CNY NDIRS curve is steeper on mid-sector paying interest and currency- and fixing-related strength in the short-end. Soc Gen sees the CNH CCS-CNY NDIRS spread widening. Meanwhile, China City Construction is planning to redeem an existing dim sum bond, writes Deirdre Yeung of Total Derivatives.

The People’s Bank of China (PBoC) is likely to issue its planned onshore bond denominated in special drawing rights (SDR) as a multi-currency structured note, according to industry participants.

The futures-implied probability of a US rate hike in June surged this week after hints by Federal Reserve officials.

The prospect of the UK voting to leave the European Union has become the foremost focus of fund managers and volatility traders, even as the latest poll on Brexit gave the ‘Remain’ campaign an 18 point lead over ‘Leave’ — prompting the pound to rally to its highest point against the dollar since May 3.

Global Dairy Trade, a platform that sets prices for the global dairy market, is pushing ahead with plans to bring dairy trading up to speed with other commodity markets and which could impact currency and futures activity.