Indian banks issuing bonds in Swiss Francs, Really…?
by Marc Chandler
A number of Indian banks have begun issuing Swiss franc denominated bonds, ostensibly to raise cheap funds and meet the demand in Europe for emerging market debt. Reports suggest that this is the first of such issues in almost a quarter of a century. While Indian banks seem well capitalized presently, the new international rules will require them to boost their capital. The Swiss franc denominated Indian bank bonds yield about 80-100 bp above some similarly rates Swiss banks bonds.
The European debt crisis which has helped drive the Swiss franc higher in recent months has also lifted to new record highs against the Indian rupee. This is seems to reflect more the Swiss franc’s movement than the rupee. The 3-month dollar-franc vol is just above 11% and the implied vol of dollar-rupee is closer to 8%.
That said, the dollar peaked against the Swiss franc on Jan 11, as made a new low since then earlier today near CHF0.9390. The franc recorded its historic high against the rupee yesterday near INR48.57. A break below INR48 would be an early indication of a reversal of the more than 5% gain since mid-Jan.
While the trade flows between the two countries is minimal, the fact that Indian banks are issuing Swiss franc bonds suggests some financial interest in the cross.