Dim sum bonds offer borrowers arbitrage opportunity

Hyundai Capital and IFC both tapped the dim sum market this week, taking advantage of the arbitrage opportunity while swaps are in their favour.

The basis swap, which in the dim sum market refers to the cost of converting fixed-rate offshore renminbi to floating-rate US dollars, touched a historical high of 250bp for the three-year tenor on Monday. A higher basis swap makes it favourable for a borrower to issue in offshore renminbi and swap to US dollars.

Korea issuer Hyundai Capital on Thursday evening was in the market with an 18-month senior unsecured offshore renminbi bond. The Rmb500 million bond $78 million offered a yield of...