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Capital Markets

Quality issuers face a year of uncertainty

Quality borrowers got away a lot of issues last month, but investors are getting more choosy, especially about dollar bonds. Rising interest rates and an equity revival also raise uncertainties about the year to come. Mark Brown reports.

Taor: applauds Freddie
Mac for sticking with its
comeback 10-year euro

HIGHLY RATED BORROWERS would be well advised to look behind January's headlines for clues as to what the rest of 2004 holds. The year got off to a superficially promising start. Indeed, quality issuers dominated primary markets last month.

The first full week of the year saw deals from Bank Nederlandse Gemeenten (BNG), Freddie Mac, Rentenbank, Kreditanstalt für Wiederaufbau (KfW), Council of Europe Development, and the European Investment Bank (EIB).

In the week ending January 23, new euro-denominated bond issue totalled e21.6 billion. Excluding sovereigns, agencies and supras contributed e4.9 billion, boosted by Freddie Mac's return to the euro market. The same week, corporates managed to issue just e1.65 billion of euro-denominated bonds.

Total issuance might have been falling well short of January 2003's spectacular e178 billion but it still looked as if quality issuers were capable of repeating last year's trick. Then, they used cheap money to meet annual funding requirements well ahead of schedule.

Look more closely at these deals, though, and it seems that highly rated issuers are in for a tough year.

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