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The Eurodollar market saw a wave of issuance in the early part of the week, while swap spreads gradually tightened. Although swaps remain close to all-time highs, secondary corporate spreads are trading wider still. This means that arbitrage is extremely elusive, and getting even harder to find. In fact, borrowers are often having to accept funding at levels less attractive than those to which they are accustomed, while others determine that current market conditions are simply too hostile (see box below).

Market commentary: Compiled by Glenn Blackley,

DePfa took its latest step away from the traditions of the Pfandbrief market this week when, through nimble swap operations that ensured Euribor minus funding, the mortgage bank priced its Eu3.5bn global superjumbo at an intended 52bp over Bunds - despite a 2bp to 3bp swap spread tightening between launch and pricing. German mortgage banks have always been among the most sensitive borrowers to any move in swap spreads and subsequent changes in the funding levels they can achieve. Such an arbitrage driven approach has in the past given jumbo issuers the reputation of being aggressive borrowers, as they have sought to ensure the finest possible pricing.

Arrangers ABN Amro and Merrill Lynch have successfully completed the co-arranging phase of the $3bn credit backing VNU's acquisition of Nielson. When the deal was first launched two weeks ago, certain market players derided its terms, saying they were too low. Some predicted the deal would crash ignominiously, leaving the arrangers with a large amount of low paying, albeit short term, debt on their balance sheets.

The Federal Reserve Bank of New York introduced measures this week designed to ease liquidity in the repo market in the period around Y2K. The turn of the year is traditionally a period of high borrowing rates, but with great concern about the potential lack of liquidity in the market as the millennium approaches, bankers fear that the pressures will be much greater than normal.

Building society turned bank Northern Rock Plc raised £600m from its first issue of mortgage backed securities this week, and lent new credibility to hopes that securitisation could at last be entering the mainstream of UK bank finance. The UK has produced a regular stream of mortgage securitisations since the late 1980s, but most of the deals have always come from new entrants to the market, including, in the last few years, sub-prime lenders.

The Republic of Portugal made a rare foray into the dollar market this week when it took advantage of the scarcity of European sovereign paper in the sector to launch a $1bn five year transaction. Despite what was widely regarded as punchy pricing the deal, lead managed by Deutsche Bank and Merrill Lynch, performed well thanks to tightening swap spreads. Launched at 73bp over Treasuries on Tuesday, the deal was trading at 70bp-71bp over by yesterday (Thursday) afternoon.

The Republic of Portugal made a rare foray into the dollar market this week when it took advantage of the scarcity of European sovereign paper in the sector to launch a $1bn five year transaction. Despite what was widely regarded as punchy pricing the deal, lead managed by Deutsche Bank and Merrill Lynch, performed well thanks to tightening swap spreads. Launched at 73bp over Treasuries on Tuesday, the deal was trading at 70bp-71bp over by yesterday (Thursday) afternoon.

Procter&Gamble pounced on an unexpected lack of corporate dollar bonds this week to launch a blow-out $1bn global offering of 10 year notes and confirm the return of demand for dollar assets.

Bayerische Hypotheken- und Vereinsbank fulfilled its promise of regular issuance under its Geldilux collateralised loan obligation programme this week, launching a Eu750m deal with a new structure designed to satisfy investors' craving for yield. HypoVereinsbank brought the first Guarantees of Euro-Loan Debt in Luxembourg transaction in February - the Eu2.22bn issue, jointly led by HVB and Goldman Sachs, was the first CLO in euros.

Building society turned bank Northern Rock Plc raised £600m from its first issue of mortgage backed securities this week, and lent new credibility to hopes that securitisation could at last be entering the mainstream of UK bank finance. The UK has produced a regular stream of mortgage securitisations since the late 1980s, but most of the deals have always come from new entrants to the market, including, in the last few years, sub-prime lenders.

Valtion asuntorahasto, the Housing Fund of Finland, brought its fourth securitisation of social housing loans this week. At Eu500m, Fennica 4 was the largest issue yet from the programme and the first to be denominated in euros from the outset. "The main objective of this deal was to widen the investor base for Fennica bonds," said Riita Salonen, Helsinki based head of capital markets at Leonia Corporate Bank, which lead managed the issue jointly with bookrunner Paribas.