Cross-currency swaps, which fell out of favour due to spiking regulatory costs, look set to make a return. The rush of US corporates funding their overseas operations with foreign local currency debt issues has waned as dollar-denominated pricing begins to look more attractive even when the costly swap contract is included. "Cross-currency swaps have become very tough to use as a result of Dodd-Frank rules changes but demand for local foreign currency debt is such that a US firm can issue dollar debt and swap into euros or Swiss francs at a much more advantageous rate than trying to attract investor demand for a zero yield or near-zero yielding bond in those countries," said Timothy Steele, head of corporate currency hedging at UBS.
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