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Berli Jucker Public Co., a Bangkok-based manufacturer with divisions focusing on glass, consumer products and imaging, entered a three-year THB1.25 billion (USD28 million) interest-rate swap earlier this month to convert a fixed-rate loan into a synthetic floating-rate liability.

Amsterdam-based Delta Lloyd plans to purchase core European government bonds and high-grade corporate debt such as Freddie Mac, KfW, Germany's Landesbanks and France's Cades. The firm will make the purchases with proceeds from the sale of Italian, Spanish and Portuguese government debt and sub-triple-A credits. Jop Bresser, director of fixed-income management, said the flight to quality in the firm's E1.2 billion Renta fund, was fueled by the belief that many more double-A rated corporates will be downgraded in the coming months.

On the view that a flight to quality induced by weak economic prospects will push Treasuries to rally further, Alan Segars, portfolio manager with ING Furman Selz Capital Management, is preparing to shift 5% of its portfolio, or $100 million, out of agencies into Treasuries. Segars says he will begin the shift provided that agency debentures tighten by an additional 10 basis points over the curve. He will look at buying five- to 10-year Treasuries because the Federal Reserve's easing policy has caused the short end to richen too much.

Can I buy a V? There's some debate over the effect of the Sept. 11 attacks on a market that was already heading towards a recession. Last week, observers ruminated on Federal Reserve Chairman Alan Greenspan's observations that the U pattern of the economy may become a V as a result of the attacks a sharper downturn, but quicker recovery. Or, to major skeptics, maybe it will become a W. "Or maybe just an electrocardiogram," one loan market player suggested.

PIMCO purchased at least $200 million in Treasury Inflation Protected Securities maturing in 2032 at the U.S. Government's $5 billion auction earlier this month. Though it has historically been overweight intermediate TIPS, the fund has sold intermediates over the last month to raise cash for the purchase of the '32s. John Brynjolfsson, portfolio manager of the Real Return Bond Fund for the Newport Beach, Calif. bond giant, says the move was made because he believes the steep TIPS yield curve will eventually flatten or invert, given the scarce supply of long TIPS (the government auctions off only $5 billion per) and their increasing popularity among investors.

This chart, provided by Citibank/Salomon Smith Barney Inc., tracks bid-ask prices for par credit facilities that trade in the secondary market. It also tracks facility amounts, ratings, pricing and maturities.

As far as bankers are concerned, the German investment community is there for the taking. The only question is how to persuade corporates of the attractions of the bond market. Bank market funding costs may be increasing, but as corporates have flexed their muscles to target tight pricing in the bond market, their experiences have been mixed.

Landwirtschaftliche Rentenbank has laboured long and hard to differentiate itself from the troubled Landesbank sector and take its rightful position nearer Kreditanstalt für Wiederaufbau. Investors now appreciate the German agency's strengths, but far from becoming complacent, Rentenbank is pursuing new funding avenues.

Yet more ingredients for rapid growth in German capital markets activity have been put in place: a levelling of the playing field in the banking sector; tax changes easing corporate restructuring; and reform of the pension system. Sceptics might argue that such hopes have proven misplaced in the past. But this time the potential rewards may be too big to ignore.

Although most German states raise their debt domestically, either through the Schuldschein market as or joint Länder transactions, more and more are following the lead of Saxony-Anhalt and tapping the international capital markets, offering investors quasi-government exposure at a spread to the Bunds. But even as the number of broad minded Länder increases, the future existence of public bonds that they issue is being debated.

The latest threat to the Pfandbrief model comes from Dublin where DePfa, one of the biggest jumbo issuers, has relocated its public sector business. But a favourable, albeit competitive, regime has not been enough to offset contracting lending opportunities to Germany's public sector, which has caused a slump in Pfandbrief issuance this year. Now the mortgage banks are having to consider lower quality public sector loan collateral and compete aggressively to expand their mortgage lending.