[et_pb_section fb_built=”1″ _builder_version=”4.16″ custom_margin=”-111px|||||” custom_padding=”||0px|||” global_colors_info=”{}”][et_pb_row column_structure=”1_2,1_2″ _builder_version=”4.16″ background_color=”rgba(0,0,0,0.03)” min_height=”103px” custom_margin=”15px||5px||false|false” custom_margin_tablet=”” custom_margin_phone=”” custom_margin_last_edited=”on|tablet” custom_padding=”10px|10px|10px|10px|false|false” box_shadow_style=”preset1″ box_shadow_vertical=”0px” box_shadow_blur=”5px” box_shadow_color=”#ff4c00″ global_colors_info=”{}”][et_pb_column type=”1_2″ _builder_version=”4.16″ global_colors_info=”{}”][et_pb_text _builder_version=”4.16″ text_font=”Open Sans||||||||” text_font_size=”18px” text_line_height=”1.8em” header_font=”Open Sans|700|||||||” header_text_color=”#000000″ header_font_size=”42px” header_line_height=”1.3em” header_2_font=”|700|||||||” header_2_font_size=”30px” header_2_line_height=”1.5em” custom_margin=”||10px||false|false” custom_padding=”||||false|false” header_font_size_tablet=”36px” header_font_size_phone=”32px” header_font_size_last_edited=”on|tablet” locked=”off” global_colors_info=”{}”]

Managing Fx risk on Masala Bond Investment

[/et_pb_text][et_pb_text _builder_version=”4.16″ _module_preset=”default” text_font=”Open Sans||||||||” text_text_color=”#0c71c3″ text_font_size=”16px” text_line_height=”1.8em” ol_line_height=”2em” header_font=”Open Sans||||||||” header_line_height=”1.8em” header_2_font=”Open Sans||||||||” header_2_text_color=”#000000″ header_2_font_size=”32px” header_2_line_height=”1.5em” custom_margin=”||1px|||” custom_padding=”0px||0px|||” text_font_size_tablet=”” text_font_size_phone=”” text_font_size_last_edited=”on|tablet” text_line_height_tablet=”” text_line_height_phone=”1.8em” text_line_height_last_edited=”on|phone” header_2_font_size_tablet=”28px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]

Forex Hedging

Published on: 14th December 2020

Updated on: 22nd January 2021

[/et_pb_text][/et_pb_column][et_pb_column type=”1_2″ _builder_version=”4.16″ global_colors_info=”{}”][et_pb_image src=”https://lightpink-wombat-703347.hostingersite.com/wp-content/uploads/2020/11/QuantArt-Intro-Blog-Image-26.png” alt=”Libor Transition– Impact on Indian corporates” title_text=”Masala Bonds” align=”center” _builder_version=”4.16″ _module_preset=”default” custom_padding=”||||false|false” global_colors_info=”{}”][/et_pb_image][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.16″ custom_padding=”4px||4px|||” global_colors_info=”{}”][et_pb_row _builder_version=”4.16″ custom_margin=”||-1px|||” custom_padding=”2px||12px|||” locked=”off” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.16″ text_font=”Open Sans||||||||” text_text_color=”#000000″ text_font_size=”18px” text_line_height=”1.8em” ol_line_height=”2em” header_font=”Open Sans||||||||” header_line_height=”1.8em” header_2_font=”Open Sans||||||||” header_2_text_color=”#000000″ header_2_font_size=”32px” header_2_line_height=”1.5em” text_line_height_tablet=”” text_line_height_phone=”1.5em” text_line_height_last_edited=”on|phone” header_2_font_size_tablet=”28px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]

Search for good USD yield is on given the abundant liquidity and near-zero deposit rates in the US. Masala Bonds or in other words INR bonds listed overseas where coupons are paid in INR offers attractive yields. Yields on Masala bonds range between 5.50% to 8.00% in INR. The only risk to be managed to get a decent yield here is the Fx risk of USDINR. If the fx risk is managed well, 3.00%-5.00% of USD yield is possible. Off late we have seen inquiries on Fx risk management related to Masala bonds and hence we are putting up a small note.

We present here some hedge instruments which are effective and cost less so that your yields are better. Please find few scenarios at different spot levels after one year for various hedge instrument and related return in bond in the tables below

[/et_pb_text][et_pb_button button_url=”https://wa.me/message/S5W24FMCZUKQN1″ url_new_window=”on” button_text=”Connect With QuantArt on Whatsapp” button_alignment=”center” button_text_tablet=”Connect with QuantArt on Whatsapp” button_text_phone=”Connect with QuantArt on Whatsapp” button_text_last_edited=”on|phone” _builder_version=”4.16″ _module_preset=”default” custom_button=”on” button_text_size=”27px” button_text_color=”#FFFFFF” button_bg_color=”#29c421″ button_border_width=”6px” button_border_color=”#7CDA24″ button_icon=”||divi||400″ background_layout=”dark” button_text_size_tablet=”” button_text_size_phone=”19px” button_text_size_last_edited=”on|phone” button_icon_tablet=”” button_icon_phone=”” button_icon_last_edited=”on|desktop” button_text_shadow_style=”preset2″ box_shadow_style=”preset1″ box_shadow_blur=”19px” box_shadow_spread=”-1px” locked=”off” global_colors_info=”{}” button_text__hover_enabled=”on|desktop” button_text__hover=”Connect With QuantArt on Whatsapp”][/et_pb_button][et_pb_text _builder_version=”4.16″ text_font=”Open Sans||||||||” text_text_color=”#000000″ text_font_size=”18px” text_line_height=”1.8em” ol_line_height=”2em” header_font=”Open Sans||||||||” header_line_height=”1.8em” header_2_font=”Open Sans||||||||” header_2_text_color=”#000000″ header_2_font_size=”32px” header_2_line_height=”1.5em” text_line_height_tablet=”” text_line_height_phone=”1.5em” text_line_height_last_edited=”on|phone” header_2_font_size_tablet=”28px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]

Spot Ref: 73.00

[/et_pb_text][et_pb_image src=”https://lightpink-wombat-703347.hostingersite.com/wp-content/uploads/2021/01/masala.png” title_text=”masala” force_fullwidth=”on” _builder_version=”4.16″ _module_preset=”default” global_colors_info=”{}”][/et_pb_image][et_pb_text _builder_version=”4.16″ text_font=”Open Sans||||||||” text_text_color=”#000000″ text_font_size=”18px” text_line_height=”1.8em” ol_line_height=”2em” header_font=”Open Sans||||||||” header_line_height=”1.8em” header_2_font=”Open Sans||||||||” header_2_text_color=”#000000″ header_2_font_size=”32px” header_2_line_height=”1.5em” text_line_height_tablet=”” text_line_height_phone=”1.5em” text_line_height_last_edited=”on|phone” header_2_font_size_tablet=”28px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]

Net return on bond in different scenarios assuming 6.00% yield in Masala bond will be as follows

[/et_pb_text][et_pb_image src=”https://lightpink-wombat-703347.hostingersite.com/wp-content/uploads/2021/01/masala2.png” title_text=”masala2″ force_fullwidth=”on” _builder_version=”4.16″ _module_preset=”default” global_colors_info=”{}”][/et_pb_image][et_pb_text _builder_version=”4.16″ text_font=”Open Sans||||||||” text_text_color=”#000000″ text_font_size=”18px” text_line_height=”1.8em” ol_line_height=”2em” header_font=”Open Sans||||||||” header_line_height=”1.8em” header_2_font=”Open Sans||||||||” header_2_text_color=”#000000″ header_2_font_size=”32px” header_2_line_height=”1.5em” text_line_height_tablet=”” text_line_height_phone=”1.5em” text_line_height_last_edited=”on|phone” header_2_font_size_tablet=”28px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]

Characteristics of instruments in short:

Forwards – locks at a rate.
Plain call – right to buy at the strike but no obligation if INR appreciates below strike.
Call spread – no obligation, right to buy at buy call strike and protection ends at sell call level. Above sell call level benefit of spread will be on your account.
Capped forward – right to buy at buy call strike and protection ends at sell call level. Above sell call level benefit of spread will be on your account, obligation below the Lower leg (sell put/buy call level).

As you can see that a capped forward from spot till 80.00 has a good chance of offering 3.50% yield. Certainly the risk needs to be managed.

Also Read:

Is it possible to get 10% return in Indian Bond Market

ECB Framework and hedging guideline

RBI’s new hedging guidelines – Impacts for Indian companies

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.16″ _module_preset=”default” background_color=”#e3e3e8″ custom_padding=”0px|||||” locked=”off” global_colors_info=”{}”][et_pb_row column_structure=”1_2,1_2″ disabled_on=”off|off|off” module_id=”Regform” _builder_version=”4.16″ background_color=”#FFFFFF” background_enable_image=”off” background_blend=”overlay” width=”auto” custom_margin=”||||false|false” custom_padding=”46px|5%|15px|5%|false|false” box_shadow_style=”preset2″ locked=”off” global_colors_info=”{}”][et_pb_column type=”1_2″ module_id=”getstarted” _builder_version=”4.16″ background_enable_color=”off” custom_padding_tablet=”” custom_padding_phone=”|1px||1px|false|false” custom_padding_last_edited=”on|phone” global_colors_info=”{}”][et_pb_text _builder_version=”4.16″ _module_preset=”default” text_font=”Roboto Condensed|700|||||||” text_text_color=”#000000″ text_font_size=”20px” text_line_height=”1.3em” header_font=”Roboto Condensed|700|||||||” header_font_size=”49px” header_4_font=”Roboto Condensed|700|||||||” header_4_text_color=”#000000″ header_4_font_size=”50px” header_4_letter_spacing=”1px” text_orientation=”center” custom_margin=”59px|||||” custom_margin_tablet=”” custom_margin_phone=”0px||0px||false|false” custom_margin_last_edited=”on|phone” custom_padding=”|1%||1%|false|false” header_font_size_tablet=”” header_font_size_phone=”35px” header_font_size_last_edited=”on|desktop” global_colors_info=”{}”]

Explore and Become our Client.

Write to Us:

[email protected]

Call us:

+91 79803 97803

[/et_pb_text][/et_pb_column][et_pb_column type=”1_2″ _builder_version=”4.16″ _module_preset=”default” custom_padding=”||||false|false” custom_padding_tablet=”” custom_padding_phone=”|1px||1px|false|false” custom_padding_last_edited=”on|phone” global_colors_info=”{}”][et_pb_contact_form use_spam_service=”on” recaptcha_list=”QuantArt Hedgenius Form-0″ email=”[email protected]” custom_message=”Home Page||et_pb_line_break_holder||Name: %%Name%%||et_pb_line_break_holder||Company name: %%Company%%||et_pb_line_break_holder||Phone Number: %%Phone_Number%%||et_pb_line_break_holder||Email: %%Email_Id%%||et_pb_line_break_holder||Please mention topics of Interest (optional) :%%Topic_of_Interest%%||et_pb_line_break_holder||” use_redirect=”on” redirect_url=”https://lightpink-wombat-703347.hostingersite.com/thank-you-blog-submission/” success_message=”.” submit_button_text=”Sign up” disabled_on=”off|off|off” _builder_version=”4.16″ _unique_id=”a71f7906-07a9-4c86-9b10-34540190b1b4″ form_field_text_color=”#a8a8a8″ title_font=”|600|||||||” title_text_align=”center” title_font_size=”29px” title_line_height=”1.3em” form_field_font_size=”14px” background_enable_color=”off” custom_button=”on” button_text_color=”#ffffff” button_bg_color=”#e88137″ button_bg_color_gradient_stops=”#b57624 0%|#29c4a9 100%” button_bg_color_gradient_start=”#b57624″ button_border_width=”0px” button_border_color=”#2879bd” button_border_radius=”6px” button_font=”Open Sans|600|||||||” button_use_icon=”off” button_custom_margin_tablet=”” button_custom_margin_phone=”18px||||false|false” button_custom_margin_last_edited=”on|phone” button_custom_padding=”||||false|false” width=”100%” max_width=”100%” custom_margin=”||||false|false” custom_padding=”||||false|false” title_font_size_tablet=”” title_font_size_phone=”20px” title_font_size_last_edited=”on|phone” form_field_font_size_tablet=”” form_field_font_size_phone=”14px” form_field_font_size_last_edited=”on|phone” box_shadow_style_button=”preset2″ global_colors_info=”{}” form_field_text_color__hover_enabled=”on|hover” form_field_text_color__hover=”#a8a8a8″][et_pb_contact_field field_id=”Name” field_title=”Name” fullwidth_field=”on” _builder_version=”4.16″ form_field_background_color=”#e3e3e8″ form_field_text_color=”#000000″ form_field_font=”Open Sans||||||||” form_field_font_size=”18px” text_orientation=”center” border_radii=”on|7px|7px|7px|7px” border_style_all=”none” global_colors_info=”{}” button_text_size__hover_enabled=”off” button_one_text_size__hover_enabled=”off” button_two_text_size__hover_enabled=”off” button_text_color__hover_enabled=”off” button_one_text_color__hover_enabled=”off” button_two_text_color__hover_enabled=”off” button_border_width__hover_enabled=”off” button_one_border_width__hover_enabled=”off” button_two_border_width__hover_enabled=”off” button_border_color__hover_enabled=”off” button_one_border_color__hover_enabled=”off” button_two_border_color__hover_enabled=”off” button_border_radius__hover_enabled=”off” button_one_border_radius__hover_enabled=”off” button_two_border_radius__hover_enabled=”off” button_letter_spacing__hover_enabled=”off” button_one_letter_spacing__hover_enabled=”off” button_two_letter_spacing__hover_enabled=”off” button_bg_color__hover_enabled=”off” button_one_bg_color__hover_enabled=”off” button_two_bg_color__hover_enabled=”off”][/et_pb_contact_field][et_pb_contact_field field_id=”Company” field_title=”Company Name” fullwidth_field=”on” _builder_version=”4.16″ form_field_background_color=”#e3e3e8″ form_field_text_color=”#000000″ form_field_font=”Open Sans||||||||” form_field_font_size=”18px” text_orientation=”center” border_radii=”on|7px|7px|7px|7px” border_style_all=”none” global_colors_info=”{}” button_text_size__hover_enabled=”off” button_one_text_size__hover_enabled=”off” button_two_text_size__hover_enabled=”off” button_text_color__hover_enabled=”off” button_one_text_color__hover_enabled=”off” button_two_text_color__hover_enabled=”off” button_border_width__hover_enabled=”off” button_one_border_width__hover_enabled=”off” button_two_border_width__hover_enabled=”off” button_border_color__hover_enabled=”off” button_one_border_color__hover_enabled=”off” button_two_border_color__hover_enabled=”off” button_border_radius__hover_enabled=”off” button_one_border_radius__hover_enabled=”off” button_two_border_radius__hover_enabled=”off” button_letter_spacing__hover_enabled=”off” button_one_letter_spacing__hover_enabled=”off” button_two_letter_spacing__hover_enabled=”off” button_bg_color__hover_enabled=”off” button_one_bg_color__hover_enabled=”off” button_two_bg_color__hover_enabled=”off”][/et_pb_contact_field][et_pb_contact_field field_id=”Phone_Number” field_title=”Phone Number ” fullwidth_field=”on” _builder_version=”4.16″ form_field_background_color=”#e3e3e8″ form_field_text_color=”#000000″ form_field_font=”Open Sans||||||||” form_field_font_size=”18px” text_orientation=”center” border_radii=”on|7px|7px|7px|7px” border_style_all=”none” global_colors_info=”{}” button_text_size__hover_enabled=”off” button_one_text_size__hover_enabled=”off” button_two_text_size__hover_enabled=”off” button_text_color__hover_enabled=”off” button_one_text_color__hover_enabled=”off” button_two_text_color__hover_enabled=”off” button_border_width__hover_enabled=”off” button_one_border_width__hover_enabled=”off” button_two_border_width__hover_enabled=”off” button_border_color__hover_enabled=”off” button_one_border_color__hover_enabled=”off” button_two_border_color__hover_enabled=”off” button_border_radius__hover_enabled=”off” button_one_border_radius__hover_enabled=”off” button_two_border_radius__hover_enabled=”off” button_letter_spacing__hover_enabled=”off” button_one_letter_spacing__hover_enabled=”off” button_two_letter_spacing__hover_enabled=”off” button_bg_color__hover_enabled=”off” button_one_bg_color__hover_enabled=”off” button_two_bg_color__hover_enabled=”off”][/et_pb_contact_field][et_pb_contact_field field_id=”Email_Id” field_title=”Official Email” field_type=”email” fullwidth_field=”on” _builder_version=”4.16″ form_field_background_color=”#e3e3e8″ form_field_text_color=”#000000″ form_field_font=”Open Sans||||||||” form_field_font_size=”18px” text_orientation=”center” border_radii=”on|7px|7px|7px|7px” border_style_all=”none” global_colors_info=”{}” button_text_size__hover_enabled=”off” button_one_text_size__hover_enabled=”off” button_two_text_size__hover_enabled=”off” button_text_color__hover_enabled=”off” button_one_text_color__hover_enabled=”off” button_two_text_color__hover_enabled=”off” button_border_width__hover_enabled=”off” button_one_border_width__hover_enabled=”off” button_two_border_width__hover_enabled=”off” button_border_color__hover_enabled=”off” button_one_border_color__hover_enabled=”off” button_two_border_color__hover_enabled=”off” button_border_radius__hover_enabled=”off” button_one_border_radius__hover_enabled=”off” button_two_border_radius__hover_enabled=”off” button_letter_spacing__hover_enabled=”off” button_one_letter_spacing__hover_enabled=”off” button_two_letter_spacing__hover_enabled=”off” button_bg_color__hover_enabled=”off” button_one_bg_color__hover_enabled=”off” button_two_bg_color__hover_enabled=”off”][/et_pb_contact_field][et_pb_contact_field field_id=”Topic_of_Interest” field_title=”Your Requirement” field_type=”text” required_mark=”off” fullwidth_field=”on” _builder_version=”4.16″ form_field_background_color=”#e3e3e8″ form_field_text_color=”#000000″ form_field_font=”Open Sans||||||||” form_field_font_size=”18px” text_orientation=”center” border_radii=”on|7px|7px|7px|7px” border_style_all=”none” global_colors_info=”{}” button_text_size__hover_enabled=”off” button_one_text_size__hover_enabled=”off” button_two_text_size__hover_enabled=”off” button_text_color__hover_enabled=”off” button_one_text_color__hover_enabled=”off” button_two_text_color__hover_enabled=”off” button_border_width__hover_enabled=”off” button_one_border_width__hover_enabled=”off” button_two_border_width__hover_enabled=”off” button_border_color__hover_enabled=”off” button_one_border_color__hover_enabled=”off” button_two_border_color__hover_enabled=”off” button_border_radius__hover_enabled=”off” button_one_border_radius__hover_enabled=”off” button_two_border_radius__hover_enabled=”off” button_letter_spacing__hover_enabled=”off” button_one_letter_spacing__hover_enabled=”off” button_two_letter_spacing__hover_enabled=”off” button_bg_color__hover_enabled=”off” button_one_bg_color__hover_enabled=”off” button_two_bg_color__hover_enabled=”off”][/et_pb_contact_field][/et_pb_contact_form][/et_pb_column][/et_pb_row][/et_pb_section]