Cross Currency Swap execution

TL;DR: CCIRS execution template

Executing bonds offshore is exciting, and often intense. There are often huge volumes of work to get through (on top of normal duties). Documentation issues, negotiations, presentations, Board papers, travel… so much going on. All too often, this makes the cross currency swap a comparative afterthought in senior people’s minds.Unfortunately, that often pushes the swap’s execution to the back of the bus, sometimes with expensive consequences. The bond is all about the margin to Treasuries, right?

T+Margin is important, but there is a lot more that happens before you end up with what you want – floating BBSW. Obsessing over the margin to Treasuries while leaking 5 points on the swap is economically irrational.

So how can you ensure an appropriate result is achieved in the cross currency swap? My tips for doing so are as follows:

  1. Don’t just throw the swap execution/management to the least capable person on your team. On the bank’s side, they certainly won’t. Note, the least capable <> the most junior!
  2. Know the swap. Nail down all of the negotiable parts prior to execution. Get screen shots for the rest. Use the spreadsheet below to help you. The bank dealers don’t really like this type of approach, and it will cause arguments. Often heated arguments. Without arguments, you’re not trying hard enough! Don’t worry, they’ll still make a small fortune and will soon forget that argument.
  3. Take more than one bank to execution. This is very important. You need to be able to drop banks if they try to play funny.

Sam He, a former colleague of mine, created the spreadsheet below. It is brilliant, the most detailed CCIRS execution template I’ve seen. I’ve never seen a text book go into anything near this level of detail. I highly recommend you use it in your cross currency swap execution process – it will lead to a better result. The spreadsheet works with both Reuters and Bloomberg, and is for AUD/USD CCIRS. If you’re looking at executing a different CCIRS, say AUD/EUR, let me know or drop Sam a line. I’m sure he’d love to help out.

CCIRS execution template

Note: The macros only copy the live pricing across, disabling them will not affect the operation of spreadsheet.