FX swaps to avoid year-end basis blowout, banks say
Earlier rollovers likely to ensure no repeat of previous cross-currency volatility
Bankers are confident that as the year-end nears, financial markets will not experience the turbulence of previous fourth quarters when the cross-currency basis widened and repo rates spiked amid a US dollar funding squeeze.
The market distortion has historically occurred when banks reduce balance sheet during the final quarter to achieve lower regulatory capital, but treasurers and investors have positioned themselves better this year, participants say.
“My expectation is that volatility
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