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Derivatives

U.K. Thrift Eyes FX Swap

Bradford & Bingley, a U.K. mortgage lender, is considering converting a EUR300 million (USD370 million) floating-rate bond into floating-rate sterling, but is holding back because of high swap prices.

Bradford & Bingley, a U.K. mortgage lender, is considering converting a EUR300 million (USD370 million) floating-rate bond into floating-rate sterling, but is holding back because of high swap prices. "We are waiting for basis swap rates to come in," said Paul Rixon, investment and derivatives manager in Bingley, U.K.

The thrift will look to convert the loan when sterling basis swap rates are flat, or possibly at minus one basis point, said Rixon. The cost of entering a basis swap into sterling is currently around minus three basis points, he added.

Goldman Sachs and Credit Suisse First Boston were the underwriters on the issue. Rixon said the thrift would likely look to the lead managers as counterparties if it were to enter the swap. The bond matures in 2011 and pays a floating-rate coupon of three-month Euribor plus 20 basis points.

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