Tradition Executes First HONIA-SOFR Cross Currency Basis Swap

The trade provides a foundation for the structure of cross-currency swaps that use SOFR and the local ARR, in this case HONIA.

Tradition (Asia) Ltd in Hong Kong, an HKMA Approved Money Broker, has today (8 October) executed the first HONIA vs SOFR cross-currency basis swap.

Another industry milestone in support of benchmark transition efforts, the trade provides a foundation for the structure of cross-currency swaps that use SOFR and the local ARR (in this case HONIA) – which is an essential for market participants to conclude definitions on terms.

The trade was executed using the 1-year Q/Q HONIA + 10 bps pa vs SOFR at flat. Both floating indices are calculated with daily fixing, compounded three months in arrears, for interest settlement.

“LIBOR is rapidly approaching phase out in 15 months’ time and Tradition is proud to be leading the way in pricing and executing trades in new benchmarks and to more widely explore the conventions which support RFR-based cross currency transactions,” said Tradition managing director Michael Poon.

Tradition also sealed the first HIBOR vs HONIA single currency basis swap in October last year in Hong Kong, and in August 2020 completed the first overnight indexed swap derivatives transaction referencing THOR (Thai Overnight Repurchase Rate) in Bangkok.

“The rapid expansion in the capital markets in Hong Kong in recent years has led to growing hedging demand on interest rate risks,” said John Tan, Global Head, Financial Markets Regions at Standard Chartered Bank, which was party to the trade

“We are committed to providing innovative financial products for our clients to meet their evolving needs as the industry undergoes the transformation into new benchmarks.”

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