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Translating USD Bond Spreads into EUR Terms with Cross-Currency Basis

Article Quant Q&A · Author: Skittles
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Summary

This note explains an approximate way to translate the spread on a USD-denominated bond into an equivalent spread over a euro reference rate. It considers a euro issuer that borrows in dollars and uses the SOFR–ESTR cross-currency basis to express the USD funding spread in EUR terms.

If the USD bond yields SOFR plus a spread, and the basis relates SOFR to ESTR by an additional spread, the approximate EUR spread is the sum of those two spreads. The answer illustrates the relationship algebraically. It does not provide Bloomberg terminal fields or instructions for retrieving swap or basis quotes, and it omits practical details such as tenor matching, conventions, and the full economics of converting funding cash flows. Treat the relation as a simplified spread translation, not a complete issuance-cost analysis.

Key ideas

  • The USD bond spread is measured over SOFR in the example.
  • The cross-currency basis expresses the relationship between SOFR and ESTR.
  • The approximate EUR spread is the USD bond spread plus the SOFR–ESTR basis spread.
  • A practical comparison requires consistent conventions and maturities, details not covered in the note.

Tags

Fixed incomeForexCarry
Full text
# Bloomberg terminal fx swap + xccy basis spread


# Bloomberg terminal fx swap + xccy basis spread












I have an EUR issuer, issued a fixed income security in USD, how in bloomberg i determine the additional yield on top of the EUR yield? Currency driven

As I understood i need fx swap spread and cross currency swap spread summed up together, where do I get those in bloomberg terminal

## Answer by Attack68 (score 1)

https://quant.stackexchange.com/a/82185

Approximately,

- If your Issuer issues in USD at SOFR + X bps

- The SOFR-ESTR cross-currency basis is Z bps

then this will equate to ESTR + Y bps where

$$ Y = Z + X $$

This is because from the cross currency:

$$ SOFR = ESTR + Z $$

And from your bond:

$$ SOFR + X = ESTR + Z + X $$

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.