Amadeusz Juskowiak

German eurobond market expects breathing space

After an onslaught of new paper fewer mark eurobonds issues are expected this week bankers said

Most managers said they were planning a low issue volume for the Bundesbanks twoweek bond calendar beginning today

We want to have a weeks pause one manager said

Last week borrowings totalled 1775 billion marks including a 300 mln mark private placement for Deutsche Bank Issues for all of February rose to nearly five billion marks from 36 billion in January

The heavy volume also meant most borrowers except the very best addresses were having to accept higher coupons

I think the Dmark market is still good but only if you can give a good coupon another manager said

But even some government borrowers were not getting the best reception for bonds which would have been taken up more readily under other conditions

Of the three mark eurobonds launched on Tuesday alone bonds for Den Danske Bank and Iceland were trading outside fees on Friday although prices had recovered from initial lows

Den Danskes 534 1992 bond was quoted at midday on Friday at 973565 compared with its par price and Icelands 612 pct 1997 bond traded at 972575 against a 10014 issue price

A 300 mln mark 618 pct 1997 issue for Nippon Telegraph and Telephone was also depressed but traded Friday within fees at 9815 9850 from its par price

Some shorter maturities did better In contrast to the 10year NTT and Iceland issues a fiveyear six pct bond for Hoogovens traded at 984075 from its 9912 price thanks mainly to its shorter maturity dealers said

The large amount of paper brought to the market in the last two months has also led many syndicate managers to complain about the Bundesbanks present fixed calendar system which they say is too inflexible

Currently all mark denominated eurobonds have to be registered with the Bundesbank in the week preceding the twoweek issue period A bank may decline to issue a bond on the requested day in the calendar but then has to wait for the next calendar period to schedule the bond again

Some managers said they would prefer to abolish the system

The Bundesbank shortened the reporting period to two weeks from four weeks last July But few expect the calendar to be completely abolished I dont think the Bundesbank would give that up one banking analyst said

I wouldnt have anything against getting rid of the system the analyst said adding banks were capable of regulating the volume of new issues themselves

The Bundesbank plays a passive role in setting the calendar without trying to regulate the issues but it needs the registration to gauge the volume of mark bonds going through the euromarket he said

For this reason few managers here foresee the Bundesbank sacrificing its present calendar system

Bond activity in West German bond trading and syndication departments is also expected to be quieter than normal owing to the carnival holiday

Carnival will close banks in Duesseldorf all day on Monday In Frankfurt banks will close on Tuesday in the afternoon