"Deregulation has helped the whole interest rate market, including interest rate swaps, cross-currency swaps and government bond trading. It also helped banks and market players to initiate products like interest rate options and digital options," Li said.
He noted that although products like interest rate options already existed in Taiwan, "there was no transactions because there was no way to hedge them."
“My feeling is that in the next six months, you will see more transactions,” he added.
Products such as structured notes have already been very popular in Taiwan and Citibank has already issued $700 million worth of structured notes this year. Inverse floaters were very popular in the second quarter of the year among local bond funds which had a very strong view that interest rates would go down.
Activity in those structured notes has since subsided, “because the equity market is now very bullish, some investors have tranferred their money from bond funds to the equity market,” Li said.
The week on Risk.net, July 7-13, 2018Receive this by email