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SEC manages to upset US and European corporate bond markets

As if the furore in the US over expensing stock options and an investigation into the insurance industry weren't enough, the Securities and Exchange Commission (SEC) announced a probe last week into how companies account for pension and healthcare liabilities.

The announcement, which included a specific targeting of six US companies, managed to widen the spreads of Ford and GM by 30bp last week and stall European debt issues by Arcelor and Unibail.

The two US car manufacturers were on an SEC list of companies that also included Northwest Airlines and Delphi. And despite the SEC making clear that the companies were picked for their size rather than any suspicions of wrongdoing, the news managed to depress the whole corporate market.

In Europe the news upset the only two corporate debt issues last week ? ?500 million ($631 million) bonds from steel maker Arcelor and French property company Unibail. Arcelor was forced to push up the price guidance on its issue by 10bp, while Unibail was undersubscribed even at 48bp over mid-swaps. Overall, the market in Europe widened by more in five days than it has done since May.

The Arcelor deal was run by Calyon, Commerzbank, Morgan Stanley and SG.

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