By Pan Yue
Bank of China deserves plaudits for trying to test the waters. The Chinese lender’s Macau branch issued Asia’s first public bond benchmarked against the secured overnight financing rate (Sofr), the most likely alternative to Libor in the dollar market, in October.
A senior banker at BOC Hong Kong said that it had already done three transactions linked to Sofr, including a commercial paper issue, a corporate loan and a deposit from a private banking client.
But the state-owned Chinese lender cannot prepare the region’s banking system for the seismic shift away from Libor without help. More needs to be done – and it needs to done urgently. The loan market is the sensible place to start.
Although Asia’s bond market will undoubtedly stumble during the transition away from Libor, the nature of the bond market – pitting myriad issuers and investors against each other – means it is hard to address the big, difficult questions.
The loan market, where relationships are more collegiate and lasting in nature, allows more open discussion.
Baby steps
The Asia Pacific Loan Market Association (APLMA), has taken only baby steps so far.