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French Mortgage Agency Enters I-Rate Swap

CIF Euromortgage, the personal credit arm of French real-estate giant Crédit Immobilier de France, has entered an interest-rate swap to convert a recent EUR1.75 billion (USD1.71 billion) fixed-rate bond offering into a synthetic floater. Laurent Tournaud, head of the dealing room in Paris, said the mortgage agency pays a three-month Euribor-based rate in exchange for a fixed rate. A second swap is then made every three months between the three-month Euribor and the Euro Overnight Index Average (EONIA).

Floaters represent 90-95% of CIF's risk, which stems from residential mortgage-backed securities, Tournard explained. All fixed risk taken by the firm is converted to a floating rate, with the swap to Euribor ensuring there is no rate risk. "With the two swaps it doesn't matter if the interest rate goes up to 20% or down to 0%, we are completely hedged," he noted.

Tournard declined to name the counterparty on the swap. Barclays Capital and Crédit Agricole Indosuez lead managed the bond.

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