RT Journal Article
SR Electronic
T1 A Primer on Trading SIFMA Swaps
JF The Journal of Trading
FD Institutional Investor Journals
SP 26
OP 36
DO 10.3905/jot.2013.8.4.026
VO 8
IS 4
A1 Pavan Wadhwa
A1 Peter DeGroot
A1 Srini Ramaswamy
A1 Alberto Iglesias
A1 Joshua D. Younger
YR 2013
UL https://pm-research.com/content/8/4/26.abstract
AB SIFMA/LIBOR ratios tend to underperform in the wake of tax reform proposals and during rallies (especially risk-off trades). Because of the relative “stickiness” of municipal yields, receive-fixed SIFMA swaps offer better risk-adjusted carry than comparable LIBOR swaps.In recent years, the municipal cash market has become more credit focused; trading ratios versus high-grade corporate credit indexes (e.g., CDX.IG) presents relative value opportunities with good risk–reward characteristics. SFIMA swaps are better suited to hedging municipal cash bonds because of their lower tracking error compared to taxable market products such as LIBOR swaps. Additionally, trading municipal cash bonds against SIFMA swaps offers a good risk–reward dynamic when bonds are trading substantially away from swaps.TOPICS: Fixed income and structured finance, legal/regulatory/public policy