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 Bundesbank's two-week bond calendar beginning today.
    "We want to have a week's pause," one manager said.
    Last week borrowings totalled 1.775 billion marks,
including a 300 mln mark private placement for Deutsche Bank.
Issues for all of February rose to nearly five billion marks,
from 3.6 billion in January.
    The heavy volume also meant most borrowers except the very
best addresses were having to accept higher coupons.
    "I think the D-mark 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 Danske's 5-3/4 1992 bond was quoted at midday on Friday
at 97.35/65 compared with its par price, and Iceland's 6-1/2
pct 1997 bond traded at 97.25/75 against a 100-1/4 issue price.
    A 300 mln mark 6-1/8 pct 1997 issue for Nippon Telegraph
and Telephone was also depressed, but traded Friday within fees
at 98.15, 98.50 from its par price.
    Some shorter maturities did better. In contrast to the
10-year NTT and Iceland issues, a five-year six pct bond for
Hoogovens, traded at 98.40/75 from its 99-1/2 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 Bundesbank's 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
two-week 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 don't think the Bundesbank would give
that up," one banking analyst said.
    "I wouldn't 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.
 REUTER
