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ABN and Merrill complete industrial swap

ABN Amro and Merrill Lynch have executed the property market’s first ever industrial sector swap. The two banks have taken a position of £10 million. The trade is the latest development in a continuously evolving swaps business. For ABN Amro, it completes the set of sector-specific property swaps.

Euromoney Liquid real estate March 2007 

The Dutch bank’s first sector-specific swap was in the retail sector in November 2005. The 15-month swap trade comprised a £30 million exposure to the IPD all property index. In January of the following year, ABN Amro completed its first office sector property swap with Lehman Brothers, swapping the IPD office return against the IPD all property index for a period of one year.

ABN Amro has certainly focused on developing the sector market in recent years. "Many clients are interested in sector trades so it is important that banks move in this direction," said Rawle Parris, a property derivatives trader at the bank, when announcing the trade. "Increased liquidity in the UK all property index will help with pricing and growth in the sector market."

This is not the first time that ABN Amro and Merrill Lynch have executed swaps in the property market together. In August last year, the two banks completed the first ever sub-sector property swap, betting on the performance of UK shopping centres. As with the industry swap, the banks took a position of £10 million.

ABN Amro was the first investment bank to establish a dedicated property derivatives trading desk, focusing on sector-specific trades where liquidity is forecast to be.