The shaping channels of the currency swap prices on the PLN market

Piotr Mielus ()
Additional contact information
Piotr Mielus: Szkoła Główna Handlowa w Warszawie

Bank i Kredyt, 2025, vol. 56, issue 5, 593-612

Abstract: A currency basis spread (CBS) reflects the demand-supply balance in the cross-border secured deposits market. In emerging markets, it particularly indicates the balance of non-residents’ flows and the liquidity exposure of local entities in foreign currencies. This article focuses on liquid instruments traded in the OTC market. The incentives to use short-term FX swaps and long-term cross-currency basis swaps are heterogeneous. The paper examines the information content embedded in changes in PLN currency basis prices. The research method involves comparing the directional sign of returns recorded simultaneously on the currency basis spread, asset swap spread, and foreign exchange spot. This information is analysed over five subperiods within a 23-year time series. Empirical results suggest the influence of currency speculation and bond investments on the short end of the currency swap curve, visible within a 10-day window. This evidence indicates that currency swaps play a significant role in refinancing local investments, both in Treasury securities and in carry trading.

Keywords: currency swaps; currency basis spread; asset swap spread; foreign exchange rates; emerging OTC market (search for similar items in EconPapers)
JEL-codes: F31 G12 G15 G19 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://bankikredyt.nbp.pl/content/2025/05/bik_05_2025_04.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpbik:v:56:y:2025:i:5:p:593-612

Access Statistics for this article

More articles in Bank i Kredyt from Narodowy Bank Polski Contact information at EDIRC.
Bibliographic data for series maintained by Wojciech Burjanek ().