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High-grade issuers face up to a year

The world’s elite AAA-rated bond issuers will need to be fast on their feet to get the best deals in 2002. Interest rates are on the way up and investors look set to focus on yield rather than quality. Charles Olivier reports on borrowing strategies.

Quality issuers with AAA credit ratings such as sovereigns, supranational banks, government agencies and blue-chip corporates found it easy to raise debt last year. Investors had the jitters and wanted safe bonds that were easy to sell. But there wasn't much high-grade paper around for them to buy because many governments had small budget deficits and were not issuing much debt.

As a result of this imbalance between supply and demand, most AAA-rated bonds issued last year ended up oversubscribed even when the rate of interest on offer was extremely low.

Many quality issuers saw the spread between their bond yields and those of government bonds such as German Bunds or US treasuries narrow to their tightest-ever levels during 2001.

European sovereigns: projected capital markets issuance '02
  Currency Amount (bn)
Italy euro 146
Germany euro 136
France euro 83
Spain euro 36
Greece euro 28
Belgium euro 23
Netherlands euro 20
Austria euro 12
Portugal euro 10
Finland euro 8
Turkey dollar 3-Feb
Source: market sources

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