EM ccy denomimated bonds (such as MXN, TRY) are often priced using cross currency swap rate (MXN-USD, etc).
I guess this is because their fundings are in USD.
My question is who are the participants in these EM Ccy fixed vs USD Sofr float swaps other than bond issuers and banks taking care of such issuances.
Also I would like to know what are the key drivers of these swap rates. Especially how USD rates affect these Xccy swaps.
As you state, these instruments are term structure versions of the currency basis risk i.e. longer dated (usually up to 10y) versions of FX swaps (which usually only trade out to 1yr). As they are a convenient way to capture an EM currency's expected performance over a longer duration (via showing the xccy basis risk in a single number) they are used for speculative trades by many global macro hedge funds as well. Their main purpose, however, is to allow local EM corporates/institutional investors to get convenient access to USD funding.
