1
$\begingroup$

Running a cross currency swap on a GBP issued 2.75% 7yr bond (i.e a bullet), with funding in USD so need to determine the equivalent in USD.

The GBP bond trades at circa 180bps over the Gilt.

Using bloomberg XCF function the USD equivalent is 3.8% implying a spread of 160 + Treasury. A difference of 20bps. The current (bloomberg as BPBS7) USD/GBP basis swap is 6.25bps.

What explains the other 13.75 basis points difference between the 2 spreads over their respective Gilt/Treasury?

Improve this question
$\endgroup$

1 Answer 1

Reset to default
1
$\begingroup$

Cross currency swaps (XCSs) are LIBOR instruments.

The difference is the difference in 7y swapspreads in the two currencies.

A swapspread is the difference between the treasury yield and LIBOR in each currency.

Improve this answer
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge that you have read and understand our privacy policy and code of conduct.

Not the answer you're looking for? Browse other questions tagged or ask your own question.