Corporate bond mkt eyes total return swaps boost

THE BUDGET PROPOSAL to introduce total return swaps (TRS) in the corporate bond market could marka structural shift in the process of investors accessing credit risk, liquidity creation, price discoveries inthe largely-illiquid secondarybond market, experts said.

- KSHIPRA PETKAR & CHRISTINA TITUS

THE BUDGET PROPOSAL to introduce total return swaps (TRS) in the corporate bond market could marka structural shift in the process of investors accessing credit risk, liquidity creation, price discoveries in the largely-illiquid secondarybond market, experts said.

While the proposal has raised expectations, market participants said clarity on the final framework will be key to determining how quickly TRS gains traction.

ATRS is a derivatives contract where one party receives the total return of a bond—coupon income plus price appreciation or depreciation—without owning the underlying security. The swap provider, typically a bank, holds the bond on its balance sheet and the buyer pays a fixed or a floating fee to the bank.