DOLLAR EUROBONDS END EASIER ON PRIME RATE RISES
The dollar straight sector of the
eurobond market ended easier after a subdued day's trading as
U.S. Banks began to match yesterday's surprise 1/4 point prime
rate hikes by Citibank and Chase Manhattan Bank, dealers said.
    The prime rates were raised to 7-3/4 from 7-1/2 pct and the
timing of the moves puzzled many dealers. However, reaction
here was limited, with shorter dated paper ending steady to 1/4
point easier, while longer dates dipped by 1/4 to 1/2 point.
    In the primary market, activity again centred on currencies
other than the U.S. Dollar, dealers noted.
    One dollar straight dealer at a U.S. Securities house
commented "There was, in fact, the odd retail buyer today, but
only in small sizes." He added that, ironically, the prime rate
rises may help the market to stabilise since the dollar rose on
the back of the news.
    The only U.S. Dollar deal launched during the day was, as
has been the case recently, equity linked. The 15-year
convertible bond was for the Bank of Tokyo Ltd and has an
indicated coupon of two pct. One source at a house involved in
the deal said, "It's got to be a blow-out. With a name like this
you're talking about Japan Inc."
    The lead manager was the Bank of Tokyo International (BOTI)
and the deal ended far above the par issue price at 108 109
pct. A BOTI official said "We've had worldwide interest in the
deal."
    She noted the Tokyo stock market had experienced a mild
correction at the beginning of the week but that bank stocks
were hardly affected.
    The yen sector edged slightly firmer and one new straight
deal was launched, a 20 billion yen bond for France's Caisse
Nationale des Telecommunications. The state guaranteed five
year bond pays 4-3/8 pct and was priced at 101-1/2 pct.
    The issue was lead managed by IBJ International Ltd and was
quoted on the grey market at less 1-7/8 less 1-3/4 pct compared
with the total fees of 1-7/8 pct. One syndicate official at a
firm not involved in the deal said "It's tight, but overall I
would say its fairly priced."
    Also launched was a five-year zero coupon bond with a total
redemption amount of 19 billion yen for Rural Banking and
Finance Corp of New Zealand. It was priced at 81.22 pct and
lead managed by Nomura International.
    In the Australian dollar sector, GMAC (Australia) Finance
Ltd issued a 50 mln Australian dlr bond.
    Hambros Bank Ltd was lead manager for the four-year deal
which pays 14-1/4 pct and was priced at 101 pct. It was
guranteed by General Motors Acceptance Corp and was quoted on
the 1-3/4 pct fees at less 1-3/4 pct bid.
    McDonalds Corp issued a 75 mln Canadian dlr bond paying
8-1/2 pct over five years and priced at 101-5/8 pct. It was
quoted around the 1-7/8 pct fees at less two less 1-3/4 and was
led by Morgan Guaranty Ltd.
    The European Investment Bank launched a 300 mln Danish
Crown, seven-year, bond withan 11 pct coupon and pricing of 101
pct. It was lead managed by Den Danske Bank.
    The floating rate note sector basically ended easier
following the increase in period eurodollar deposit rates
prompted by the prime rate increases, dealers said. But they
noted that mis-match deals - issues whereby the coupon is
re-fixed on a monthly basis - were firmer.
 REUTER
