Total Return Equity Index SWAP

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SomeDude

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Hi
I’m currently looking into a total return equity index swap. Ive been quoted two rates. One in local (NZD) and the other in USD as follows:
1. NZ 3 month rate being 3.23% plus 0.65% for a total of 3.88%
2. 3 Month libor being 0.29% plus 0.25% for a total of 0.54%
Now obviously I want to settle the contract in USD and pay the 0.54% which is far less and receive the index. But obviously theres no free lunch so what am I missing?
Thanks
 
Probably in the wrong section but I have worked it out.
If I settle the swap in USD (i.e. the MSCI World USD Index) then I only receive the P&L of the index. To replicate the MSCI World NZD I also need to receive the NZD change in the principle. I can do this by buying the principle in USD forward. Thats where I pay the forward points making it indifferent between options.
 
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