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The following is issued on behalf of the Treasury Markets Association:
The Treasury Markets Association (TMA) announced today (December 14) that it would launch the Renminbi Swap Offer Rate (CNY SOR) Fixing in Hong Kong on December 18, 2006.
The CNY SOR Fixing has been developed by the TMA to serve as a market-based floating rate benchmark for Renminbi Non-deliverable Interest Rate Swaps (CNY NDIRS). The CNY NDIRS involve counter parties swapping fixed-interest payments for floating-rate payments based on the same underlying notional principal, on fixed dates over the life of the contract, with the net cashflows settled in US dollars.
The CNY SOR Fixing is calculated from (a) Spot US dollar/renminbi exchange rates published by the China Foreign Exchange Trade System; (b) renminbi non-deliverable forwards rates; and (c) US dollar interbank rates in Hong Kong (USD HIBOR). (See Annex A for the Fixing Methodology.)
In conjunction with the launch of CNY SOR Fixing, the TMA will also launch the USD HIBOR Fixing. This additional fixing will be used in the calculation of the CNY SOR Fixing and facilitate the development of products based on the rates.
Ms Anita Fung, Chairman of the TMA Market Development Committee, which developed the CNY SOR Fixing, said, "The launch of the CNY SOR Fixing is consistent with the TMA's mandate to help develop treasury products and services in Hong Kong to meet new market demands."
"We believe that the Fixing will provide a much-needed market-based benchmark to facilitate the growth of the CNY NDIRS for corporations and financial institutions outside of the Mainland to better manage their renminbi interest rate exposure," added Ms Fung.
At present, CNY NDIRS are traded using existing Mainland interest rate benchmarks, including the seven-day repo rate or the one-year deposit rate, as the floating reference rates. The launch of the CNY SOR will provide an alternative benchmark, covering a full spectrum of tenors from one month to 12 months. Corporations and financial institutions which currently do not have access to the Mainland financial market can use the CNY NDIRS to manage their interest rate exposures. With the introduction of the CNY SOR as an alternative benchmark, users of the CNY NDIRS can choose the benchmark that best matches their specific risk profiles.
Reuters Limited has been appointed by the TMA as the Calculating Agent for the computation and dissemination of the CNY SOR Fixing. Two panels of banks, one each for the CNY NDF and the USD HIBOR, have been designated by the TMA as the contributing banks. The composition of the contributing banks will be reviewed by the TMA regularly. (See Annex B for the names of contributing banks.)
The CNY SOR and USD HIBOR fixings will be published on both Reuters RICs <CNYSORFIX=>, <USDHIBOR=> and Reuters pages <CNYSORFIX>, <USDHIBOR> at 11.30am (Hong Kong time) from Monday to Friday, except public holidays or if Typhoon Signal No. 8 and above or the Black Rainstorm warning is hoisted.
For enquiries, please contact the Treasury Markets Association at 2878 8046 or 2878 1577.
Ends/Thursday, December 14, 2006
Issued at HKT 17:16
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