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Falling yields drive yankee issues

Think funding, think America. That's what many borrowers are doing as US interest rates sit at historical lows and investors roll out the welcome mat. And you don't have to be triple-A rated to join the bandwagon, as Norman Peagam explains.

A EUROMONEY SURVEY - MARCH 1996

Borrowers pile up the yankees

As US interest rates approach their lowest levels in more than two decades, foreign borrowers are queuing up to raise capital. American investors, for their part, are snapping up long-term bonds and bonds issued by lesser credits. The People's Republic of China $400 million yankee issue in January - $100 million for a stunning 100 years - has been the most dramatic demonstration of this convergence of interests to date. Public bond offerings by foreign issuers in the US are known as yankee bonds.

This type of issuance should continue in the near term, as most economists believe interest rates will remain low for the next several months - and should decline further if a budget compromise is reached in Washington - before perhaps beginning to rise as the November presidential election approaches. cs First Boston is advising clients to raise funds during the first half of the year. In February, CSFB estimated there were $10 billion to $15 billion in yankee issues ready to come to market and predicted "a surge of issuance as rates decline".

During the past six years, according to the Federal Reserve, foreign non-financial borrowers placed $170 billion of public and private bonds in the US - nearly four times the volume issued during all of the 1980s and taking the total amount outstanding to $264 billion last September.

Annual

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