Cross-currency basis swap quote conventions

BurntNerves · May 28th, 2008, 7:50 am

As I understand it, when considering cross-currency basis swaps between USD and a foreign currency, the quoted cross-currency basis swap figures should normally be added to the foreign currency payments. However, with certain currencies this convention is not followed, and the spread is added to the USD payments. Is this correct, and is there any easily available documentation listing which basis swaps follow which convention?

Martinghoul · May 28th, 2008, 9:16 am

As far as I know, it's always USD Libor flat vs the other ccy index plus a spread. I do not know of any ccy where this convention is violated.

BurntNerves · May 28th, 2008, 10:11 am

Thanks. I've been given the specific example of MXN-USD basis swaps, with the spread added to the the USD leg. Is this definitely incorrect?

Martinghoul · May 28th, 2008, 12:30 pm

Well, ain't that sumthin'... You live, you learn and you, sir, are correct.The convention is USD LIBOR flat vs local ccy+ for all ccys, with TWO exceptions: Mexico and Chile, which are local flat vs USD LIBOR +. Apparently, this was adopted as the convention because it was mostly traded by the locals who preferred to quote it the other way round. For all the other ccys the main dealers were in London, so they adopted the standard convention.

BurntNerves · May 28th, 2008, 1:15 pm

Thanks again. Could I ask where you found this trinket of information?

Martinghoul · May 28th, 2008, 2:10 pm

I asked people... People far more knowledgeable than you and I, amico.

pcg · May 29th, 2008, 2:50 am

in some ccy pairs the basis is not quoted at all.. do we take that to mean that the ccyswap levels are already quoted with adjustment for basis ? if not is it due to currency non convertibility that there is no basis swap quoted ? an example is the india rupee .

Martinghoul · May 29th, 2008, 8:39 am

I don't really know about how basis swaps work for NDF ccys. My guess is that because it's settled in USD anyway, things work differently.

seventwooff · October 8th, 2013, 7:32 pm

QuoteOriginally posted by: MartinghoulWell, ain't that sumthin'... You live, you learn and you, sir, are correct.The convention is USD LIBOR flat vs local ccy+ for all ccys, with TWO exceptions: Mexico and Chile, which are local flat vs USD LIBOR +. Apparently, this was adopted as the convention because it was mostly traded by the locals who preferred to quote it the other way round. For all the other ccys the main dealers were in London, so they adopted the standard convention.

dweeb · October 9th, 2013, 10:12 am

If you have access to a Bloomberg terminal it's all on there. Also MXN has a 28 day basis v's USD 30 or actual.