Vietnamese banks and corporates are set to benefit from the opening of the interbank market for interest-rate swaps now that HSBC and Standard Chartered have completed the first such trade.

The $3 million trade is a five-year swap, with HSBC paying a floating rate at the three-month Vietnamese interbank offered rate in exchange for receiving a fixed dong rate from Standard Chartered.

Vietnam's central bank paved the way for interest-rate and cross-currency swaps with a blanket approval in December 2006, but this is the first trade to come to the market. Before the approval, such swaps were possible, but the central bank only issued approvals on a case-by-case basis.

The blanket approval should create a more liquid market that will allow banks and companies to make better use of interest-rate hedges to manage their exposure.

"While this is the first interbank dong interest-rate swap transaction in Vietnam, there is every expectation that other similar trades will follow," says Anita Fung, HSBC's treasurer and head of global markets Asia-Pacific, and chair of the Hong Kong Treasury Market Association.

Dong currency options are under development at HSBC and several other banks, and their development should open the possibility of structured swaps and a range of other more complex structured products.

This trade is the latest in a string of market-opening transactions that HSBC and Standard Chartered have carried out, particularly in China's derivatives market. The two banks pioneered renminbi non-deliverable interest-rate swaps and swaptions in 2005, non-deliverable renminbi interest-rate swaptions at the end of 2006 and the first such swap based on the new Shanghai interbank offered rate earlier this year.