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Market monitor

Emerging market Yankees; overnight swaps; Deutsche's rating tussle; Tobin put to bed. Edited by Peter Lee

An emerging markets rush

The yankee bond market, once the preserve of highly-rated foreign borrowers seeking long-term dollar debt, is getting junkier and junkier. By the end of September, $11 billion in high-yield yankee bonds had been issued this year, almost twice the amount during the same period a year earlier, according to Standard & Poor's. About half the non-investment grade issues were from companies in the emerging market countries of Asia and Latin America. These raised $5.5 billion, compared to $1 billion in 1995. Much of the rest of the junk came from Canadian issuers. High-yield deals now comprise 40% of the market, up from 33% last year.

A slew more is expected before the end of the year, as issuers try to hit the market before us interest rates rise. For the lower-rated deals, "spreads are attractive right now", says s&p analyst Diane Vazza. "There's so much cash out there, and not enough supply." As a result, she says that "yankee bonds that are 144as are trading more like public securities and are more liquid, since the expectation is that about 50% will become public securities".

Most 144a issues carry registration rights.

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