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One-month euro/U.S. dollar implied volatility rose to 14% Wednesday from 11.5% the day before the attack on the World Trade Center in New York. Demand for euro calls/dollar puts and uncertainty drove the jump in volatility over how a U.S. retaliation to the terrorist attacks would impact an already weakening dollar. Investment banks were the most active, buying one-week euro calls/dollar puts last week as the one-month risk reversal moved further in favor of euro calls. The options typically had strikes around USD0.95, when spot was trading at around USD0.93. Traders say they were buying euro calls and selling dollar puts for protection rather than taking profits. "Many are staying out because of the tragic events. Nobody really has a handle on where the dollar is going to go. A lot will depend on the U.S. equity markets and interest rates," one trader commented.

Though the last junk issue was on Sept. 6, several capital markets officials and investors believe junk issuance could start up again this week. The only deal that may actually be on the road is a $275 million deal from Sweetheart Cup Inc., according to a senior capital markets official. This deal is led by Jefferies & Co., but Jefferies executives could not be reached at press time. Jim Potesky, industrials and food analyst in the leveraged finance division of Credit Suisse Asset Management, says the deal has appeal because Sweetheart makes products that will still be attractive in the continuing downturn.

Last week's plummeting Nasdaq sparked debate over whether the bank debt market will spiral downward as well. One bank dealer said the market will be more resilient, using the analogy of a mortgage to prove his point. He compared a company to a house and bank debt to a mortgage. "If the market value of a house falls below 20%, the mortgage will recover full value, but the equity gets wiped out. The same is true for a company," he noted. Another dealer put it this way: "They don't call it senior secured for nothing."

In the week following the attack on the World Trade Center and the Pentagon, the SEC relaxed rules allowing companies to buy back their equity. As a result, most of the capital markets activity has been short-dated debt by higher-rated entities looking to take advantage of the massive steepening of the yield curve to fund stock buybacks. First out of the shoots was a two-tranche bought deal from A2/A Disney. The 2-year and 3-year offerings (each $500 million) priced with eye-catching coupons of 3.9% and 4.5%, respectively. GE Capital also came to market with a $2 billion 1-year floater. We expect to see this trend continue near-term. Overall, the average weighted maturity of debt issued was under 5 years for the first time this year and weighted average credit quality remained at AA/AA-.

Gerhard Lewark, senior vice president and treasurer

Guido Magrini, director general of finance

Juan Mario Laserna, director of public credit, ministry of finance and public credit

László Búzás, managing director of the government debt management agency (AKK)

Fabrizio Ghisellini, head of the Italian treasury's international funding programme

Vasco Pereira, chief executive officer, Instituto de Gestão do Crédito Público

Eduardo Sergio Gonzalez Edeza, treasurer, bureau of the treasury (BoTr), department of finance