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The terrorist attacks in New York and Washington defied even the most vivid imagination. What is already very clear, however, is that almost every financial institution and every employee, from chief executive to the settlements staff, will be directly or indirectly affected. It is not simply a case of people you knew at Deutsche Bank who were in the building next door or the 3,500 in Morgan Stanley's asset management division and then don't forget the tragedy at Cantor Fitzgerald whose headquarters were on the 104th Floor of Tower One. But how many other friends or relatives might have been visiting the World Trade Centre for business meetings or business breakfasts?

It is all change at the top for IPAs. Relentless consolidation has put Deutsche Bank at the forefront of the IPA business. But its position is far from secure. Tough competition has meant that acquisitions are not over. But it is not just the smaller houses that are under attack. The sector believes that this time one of the bigger fish could leave the market, and that it is Bank of New York reeling them in. Jeffrey Volk, managing director, agency and trust services at Citibank, which has dominated the IPA market for the last 15 years, says: "There is constant speculation about further consolidation within the IPA market and it would not be a total surprise if one of the major IPA players were to be acquired." But he is quick to divert speculation away from Citibank. He says: "We have clearly demonstrated our commitment to this market following the successful acquisition of JP Morgan's IPA business." And some market players are speculating that Deutsche Bank is the favourite to go, although the bank was unable to comment on the circulating rumours. But Graham Cox, global product manager for programme debt at Deutsche Bank, and chairman of the IPA association, does not dismiss the possibility of future acquisitions elsewhere in the market. He says: "There is bound to be more consolidation. But you have to wonder how many more mergers there can be before the Monopolies Commission gets hold of it. However I think it is safe to say that we will not be seeing any new players in the market." Not surprisingly Cox is more interested in talking about Deutsche Bank's success. After purchasing Bankers Trust in 1999 Deutsche Bank shot to the top of MTNWeek's IPA programme league table last year. It recorded a 35% share of new Euro-MTN programmes signed in 2000, according to MTNWare. And Cox believes it is the Deutsche Bank name that has helped achieve this. He says: "We have had a great year. Our market share has grown tremendously leaving us miles ahead of the competition. This is down to a combination of things: the fact that we are the preferred choice and the fact that the Deutsche Bank name has a lot more clout than Bankers Trust did." But despite the market's domination by Deutsche Bank, Citibank, and to a lesser extent Chase Manhattan, it seems there is still room for smaller players. Bank One was the appointed IPA for just two programmes last year but Brian Welsh, securities product manager at Bank One, is confident that there is a demand for their type of business. He says: "There is definitely room for small players in the market. Lower volumes give the agent the ability to offer a more tailored service. Our main priority at the moment is to create an awareness of our capabilities in the sector and to ensure that issuers and arrangers think of Bank One when they are bringing new programmes to the market." Volk, at Citibank, which is top of MTNWeek's IPA issuance league table, does not share his confidence and is certain that only the bigger agents will survive. He says: "At Citibank we transact in every major market but smaller IPAs, without an appropriate infrastructure, may struggle to offer global solutions to clients." Yet there were 20 agencies active in the MTN market last year. And only seven were appointed to more than three programmes. Welsh, at Bank One, believes that the abundance of less active agents will cause further consolidation in the market, and that a merger for Bank One is not out of the question. He says: "There are still quite a few small IPAs in the market, so we may still see some consolidation this year. At Bank One we would consider any business opportunity that would complement our present capabilities." This is good news for BNP Paribas. It was appointed to 13 MTN programmes last year, according to MTNWare, and the bank is keen to build on this in 2001. Gary Webb, global corporate trust at BNP Paribas, says: "Citibank and Deutsche both have a longer history in the business and have grown through acquisition. But we have begun to push hard on the MTN side in the past few years. We are looking at the option of expanding ourselves and are looking closely at other providers in the business." In its determination to rattle the big names, BNP Paribas now offers a wide range of services for issuers. Webb says: "Three months ago we set up our UK trustee company and hired Sally Easton, the current vice chairman of the IPA association. We think that if you can offer a full range of services then you are an interesting product. Some of our competitors believe that they can proceed in the structured market without the trustee service. But people are looking for a one-stop shop. Very rarely do you find an issuer that wants to use a lot of parties for one transaction. That could be a nightmare." The IPA market has become fiercely competitive and Webb maintains that offering a complete service is very important way to secure success in the area. A lot of big programmes have already been signed. And, as IPAs are rarely removed from programmes, this represents lost business. He says: "If BNP Paribas is the arranger then we obviously leverage our position. We also sometimes call issuers who have programmes to see if they are satisfied. During acquisitions some issuers are reluctant to work with particular IPAs. But it is very rare for IPAs to get removed from a programme. There is obviously a legal cost attached to changing an IPA. So it is a case of how bad do you have to be before it is really necessary?" Hilton is one issuer that swapped its IPA. Its previous agent, Barclays Capital, left the IPA market after it was acquired by Bank of New York, and Hilton took this opportunity to appoint Deutsche Bank. Vinod Parmar, assistant group treasurer at Hilton, says: "When choosing an IPA the important thing for us is the relationship we have with them, and their information systems. We used Barclays because we had a very good relationship with them. But when they left the market we thought the time was right to find a new agent." But Parmar does not have much time for IPAs. He says: "Cost is not a major feature when choosing an agent. In terms of price, things are pretty flat on the IPA side. The relationship you have with them is more important. They are pretty much behind the scenes and I suppose they save the issuer a lot of work. But I must admit IPAs are not something that is given a lot of thought." It is this attitude that the industry is eager to change. Fees in the sector have fallen steadily over the years but IPAs are beginning to say that enough is enough. Cox, at Deutsche Bank, is positive that issuers are starting to realize the value of IPAs and that there will be a gradual rise in fees to reflect this. He says: "The pressures on fees will remain but there is enormous long-term value that issuers get from an agent, such as the intra-day credit risk, and I think we may see agents beginning to push back on fees. The good clients recognize the value of our service but the problem comes when you are setting up a new programme with a new issuer who has not experienced the valuable service an IPA provides." But Welsh, at Bank One, is not so confident. He says: "Reductions in fees have happened over a fairly significant period of time and once fees have gone down it's very difficult to introduce them again in the future." Yet Welsh has not given up. He hopes the large number of structured trades that are entering the market, and the complexity they bring, will help to raise the profile of IPAs. He says: "Asset-backed products are very much the future of the market. These transactions generate a diverse revenue stream for the agent. We have seen significantly more structured trades, and arrangers and issuers now need to appoint an IPA with the expertise to match." Other market players agree that asset-backed products are an important feature but Cox, at Deutsche Bank, does not see them as new to the market. He believes that another product has strengthened the IPA hand. He says: "Something that we have seen develop recently has been more of a move towards equity products and this is changing the role of the agent. We are now providing more of a value-added service, moving away from that of pure debt into an equity-based role." But some are far from happy with the market's current infrastructure. They think that it is still too inefficient. Cox says: "In Europe we have not been able to get the straight-through process. We have not gained the efficiencies that are apparent in the US. The challenge for us is how we can make more efficient models. But this is a slow process given that there are a lot more variants in the MTN market - MTNs will never be like CPs." For commercial paper, same-day settlement is now a real possibility and new technology such as Capital Net's Issuelink has made this possible. But on the MTN side things are different and some blame the division between the two major clearing houses. Webb, at BNP Paribas, says: "Settlement systems need to sort out their act. Last year I would have said that a merger between Clearstream and Euroclear would have been sooner rather than later. But now they are both looking at the prospect of the equities market and it seems as if it is viable for them to follow their own projects." Welsh, at Bank One, agrees: "Same day settlement? No. At least not at once. Bank One already provides same-day settlement for short-term money market instruments. But the MTN market does not currently lend itself well to same-day settlement. The current process within the ICSDs needs to be expanded and become more efficient before it is extended to the more complex MTN product." A merger between the two clearing houses has been rumoured for a long time and although Webb, at BNP Paribas, is positive it will cause a stir in the market, he concludes that it will be a different kind of merger that lights up the market in 2001. He says: "IPAs are waiting for the big bang on the settlement front but this is not going to happen overnight. Europe is still fragmented both legally and culturally. In the future, IPAs will see a lot of outsourcing of activities. They will take on a broader role and smaller players will leave the market. In our business we often hear of exits and acquisitions. And the big news for 2001 could be the acquisition of a significant player." And if the rumours are to be believed, Bank of New York will be the acquirer.

The sun is shining on the Spanish sector. Spanish issuance last quarter was four times greater than in the same period two years ago. And the number of Spanish issuers has swollen by a fifth since the beginning of 2000. But it is not just borrowers demanding attention. Government legislation has meant that Spanish insurance companies are cash-rich, and their hunger for yield and extended maturities has driven them to buy all the long-dated and structured MTN paper they can get their hands on. The Spanish government has fuelled this demand. Its ruling, which forces Spanish companies to outsource company pension funds to external managers, saw pension fund assets soar to $16.23 billion, an increase of almost 20% on the previous year. This growth, coupled with the restrictions placed on insurance companies to match their liabilities with their assets, has unveiled a very important investor base that craves longer tenors and higher returns. Maite Sampedro is head of fixed income at Intercaser de Seguros y Reaseguros (Intercaser), a Spanish insurance company owned by the Dutch group Skandia. She has little doubt about the value of the MTN market for Spanish investors. She says: "The MTN market has taken a more eminent position in the last few years. The importance of MTNs is now large in the running of Spanish insurance companies and I am positive that this will continue to grow in the future." But Sampedro needs a certain type of paper. The legal changes placed upon insurance companies to immunize assets have pushed the sector towards highly structured tickets where the payouts are bigger. Sampedro says: "The MTNs that are bought by insurance companies vary with the moment and the liabilities that need to be covered. As with most policies we have a guaranteed rate that we have to meet. And in most cases these tend to be high. Therefore we have to buy paper that gives us better rates of return and that means buying highly structured paper. The term of paper we buy tends to be above 20 years and for this length we prefer to position ourselves in the finance sector." Dresdner Kleinwort Wasserstein is one of the top four bookrunners for Spanish debt this year and Henry Nevstad, global head of MTNs at the bank, explains which issuers are meeting the demand of the insurance companies. He says: "The insurance companies are large buyers of long-dated products. The long-dated plain vanilla demand, typically for double-A rated issuers, has been very strong in the last year or so. And this has been diligently serviced by the German landesbanks in particular, issuing subordinated debt." Nevstad continues: "As in most markets investors have a natural preference for domestic names but only to a certain limit. For diversification reasons Spanish investors have increasingly been looking beyond the usual suspects and buying across borders." Javier Estrada, head of corporate fixed income at AB Asesores, the biggest independent financial consulting group in Spain, is testimony to this. He says that Spanish names are too expensive and, although he has no problem buying in Spain, his main priority is the search for value. He says: "We do not target home-grown names. We find that they are more expensive. French investors like to buy French names but these are some of the most costly. We do not mind if the paper is German or Spanish as long as it brings value. But buying paper from the German market makes sense. Commodities such as Pfandbrief are highly rated, liquid and transparent." The small number of corporate issuers in the Spanish market creates a further problem. Pedro Aragones, debt capital markets at Banco Santander Central Hispano (BSCH), believes that Spanish investors have a limited choice when it comes to buying domestic paper and this has forced them to look abroad in order to add breadth to their portfolios. Aragones says: "If you look at any market you will see that people search for local names. But the number of corporate issuers in the Spanish market is not large and so investment funds have had to target foreign names to remove overexposure. Popular corporates such as Endesa are big issuers in the market but many investors can no longer buy Endesa paper. This, and the legislation placed on firms to cover their cash flows, has forced investors to look past domestic bonds to particular high-paying issuers abroad such as the landesbanks, gics and the big corporate names." But the money flowing into the insurance funds looks set to rise. In November 2000 the deadline for the outsourcing of pensions to approved funds was extended. And, because setting up an insurance policy reduces the possibility of confrontation with unions over the investment of employee funds, most employers have decided to place funds into insurance policies ahead of pension funds. The government's original December 2000 deadline was pushed back to November 2002 following pressure from both the employers' confederation and the principal trade unions. Angel Pola, executive director at BSCH, thinks that this was inevitable as the legal requirements were too difficult for the smaller firms to meet. He says: "The smaller and middle size companies were very slow at getting round to outsourcing their pensions. For them outsourcing is a big problem because of the difficulties involved in renegotiating various collective agreements, and so far only half of this outsourcing has been achieved." But the delay does not bother Pola. He is confident that this will continue to make the Spanish market an excellent hunting ground for issuers. He says: "Because we are only half-way there the Spanish market is still very lucrative for issuers at the moment." And most people recognize that improved education among Spanish investors has been integral. Sampedro, at Intercaser, says: "The number of Spanish investors has grown in the last decade. The public is becoming more aware. As such they are becoming more critical and more demanding of information. Investment funds have experienced vertiginous growth with an enormous part of direct investment shifting away from traditional tools such as bank deposits and treasury bills." One MTN dealer active in the Spanish market agrees but points out that Spanish investors have a long way to go. He says: "Spain is one of the newest markets to experience substantial growth. But investors and issuers are still learning in terms of how they operate. The market will continue to grow. We are not there yet." And according to Estrada, at AB Asesores, the future looks good for the Spanish market. He says: "The market here in Spain has grown very rapidly. Spain has the lowest birth-rate in the world and this will require a very big change in investment to fund future retirements. Paper from the telecoms and the autos has been extremely profitable over the last year and I think that this will continue in 2001."

Japanese investor demand was next to nothing following Tuesday's terrorist attack on the World Trade Centre in New York City. The Tokyo stock market fell to its lowest level in 18 years and accentuated the problems of an economy already carrying the burden of a 5% unemployment rate - its highest level since 1953. But Japanese investors expected a worsening economy and have been looking abroad for better returns for some time - good news for the MTN market which has seen yen issuance from non-Japanese borrowers flourish. Nobuhiro Koga is head of fixed income at Quantis Asset Management. He says: "The Japanese economy is getting worse but this has made it a good time for foreign names to fill their books. If our customers instruct us to buy foreign names then we have no problems in doing so. And at the moment more customers are asking us to do this." But Koga is only allowed to buy MTNs from the governmental sector and is still concerned about the high-profile corporate downgrades of last year. He says: "The returns are clearly greater with corporates but I am restricted to buying only government bonds, which I take in the five- to 10-year maturity. I am not allowed to invest in corporates. There is no point in us trying to invest in an individual company's risk." The head of global fixed income at one of Japan's largest insurance companies agrees. But he believes that it is the complexity of a corporate's credit that makes government bonds more appealing. He says: "Investing in yen-denominated foreign paper is becoming more popular but this increase has not been dramatic. We only buy government-related entities that come out of Europe such as the utilities. We are not interested in corporates. Although corporate spreads are better we do not have enough staff in the credit analysis department to confidently buy such paper. Doing credit analysis for corporates is much more difficult than for sovereign entities." MTN issuance in yen from non-Japanese central governments, local authorities and public utilities has surged. So far this quarter, issuance from this sector increased by 300% on the previous quarter with outstandings totalling $5.18 billion, according to MTNWare. And these totals are 550% greater than the same period last year. Hideto Shiba, senior fund manager of foreign bonds at Mitsui Life Global Asset Management (Mitsui), is not surprised by these figures. He says: "Because of the current low interest-rate environment Japanese investors are keen to expand their assets abroad. And consequently we are buying a lot of foreign government bonds and Pfandbrief." But Shiba favours the US market. He says: "At the moment we hold most of our foreign paper in US bonds simply because of the wider spreads that we can get there. In terms of what corporate paper we buy, we look at single-A rated entities and above and this will only be held in the short-term. The spreads are safer and so we don't buy anything longer than three to four years." Instrumental to the movement of funds abroad is the redemption of savings from Japanese postal accounts. A high proportion of savings in Japan are held in the country's postal savings system and a large amount of this money was redeemed last year with more to come by the end of 2001. Although a great deal of this cash will be reinvested in the system, Shiba, at Mitsui, believes that there could be substantial outflows into non-Japanese sovereign and corporate paper. He says: "The Japanese are still very big savers and most of this does go into postal savings, but many of these deposits date back around 10 years when the yields domestically were much higher. Therefore many people are transferring their money to foreign instruments to match their existing returns. And I think this will continue. It is difficult to see a recovery in the economy in the near future and it is clear that this will stimulate demand for foreign investments." The head of global fixed income at one of Japan's largest insurance companies is not so sure. He says: "To some extent there has been a movement away from the postal accounts to foreign bonds via the mutual funds but Japanese people are extremely cautious investors and this movement has not been as big as expected. Interest rates are low and the stock market in Japan is not performing. The majority of people want safety and have kept their savings in the postal accounts." The fall in domestic Japanese issuance has furthered the flight of funds abroad. Issuance from Japanese borrowers this year totals $4 billion and is 11% lower than the same period last year. Industrial production in Japan fell by 8.5% on the year to July 2001 and many Japanese companies are keen to reduce their existing levels of debt. One trader, at a major Japanese house, believes that weakened demand for funding from Japanese companies is heightened by the fact that companies are able to get cheaper funding from the Japanese banks. He says: "It is far easier and cheaper for companies to go to their banks first. The banks that have survived have been recapitalized and are very keen to extend loans to credit-worthy borrowers that can put funding to productive use. So why should they go anywhere else?"

John Deere has dropped ABN Amro and SG as dealers off its $1 billion Euro-MTN programme. Mizuho, RBC Dominion Securities and TD Securities have been added to the dealer panel. The programme was originally signed in July last year and was arranged by Deutsche Bank. It has $253.76 million outstanding off three trades.

Turkey The $250m one year term loan for Akbank is due to sign next Friday. Arrangers say that because of the atmosphere of caution, it may be more appropriate to have a signing by power of attorney rather than gathering the syndicate of banks for a signing ceremony.

* Karl Dannenbaum, a member of Lehman Brothers' executive committee for investment banking in Europe, has been named CEO of Lehman Brothers in Germany. The role reflects the firm's recent focus on its German operations, having set up an office in Munich in June. The firm has had a presence in Frankfurt since 1987, but until the creation of Dannenbaum's new role responsibility for the individual German business units was handled by London management.

Tuesday's terrorist attack on New York City has hit volumes in the MTN and CP market. Trading volumes are down dramatically and investor inquiry has been almost non-existent. Forty-six trades were closed on Wednesday according to MTNWare, and the number for Thursday came to 47. This compares to volumes between 67 and 100 on the days before the attack. But dealers are optimistic that trading will pick up as the new week begins and business will regain some kind of normality. One dealer, at a European house, says: "The markets will have more clarity on Monday. People will start trying to take an interest in the markets again, but investors will still be worried about exposures and spreads." Sir Eddie George, governor of the Bank of England, told the BBC in an interview on Wednesday, September 12, that the settlement systems are working much better than could have been expected. He said: "My biggest concern yesterday was that the system of payments, settlements and arrangement would be seriously interrupted. These systems are working pretty much as normal." He added: "Some markets have been thinner than you would have expected, for example the foreign exchange market." This has had a knock-on effect in the MTN market, as one dealer explains: "A lot of markets are not open, so people do not know the right levels to post." But the secondary market was quicker to recover than new issues. One dealer comments: "The secondary market is already picking up, as are the euro and the swaps markets." And another trader predicts that trading in secondary notes will see even more action on Monday. He says: "Secondary trading will be very fierce with people trying to get out of one sector into another." The Euro-CP market saw volumes drop to less than a third of the usual number of trades, according to CPWare. Fifty-one trades were done on the day following Tuesday's attack, compared to 175 deals that would have been closed before news of the attack broke on Tuesday. And although business in the CP market is continuing at a much lower volume, it is mainly confined to one-day maturities. Philip Howes, head of Euro-CP trading at Deutsche Bank, says: "There is activity in the US, but most is on an overnight basis. A fraction of the trades have been done in US CP and investors are mindful of how liquidity could deteriorate. That will be the situation for the coming days." Issuers with both US CP and a Euro-CP programmes have felt less of an impact on their short term funding, and have found refuge in the Euromarket. And Howes, at Deutsche Bank, says: "Asset-backed issuers have been active today. They have been paying between five and 10 basis points above their normal levels in order to see them through the market. And dealers are showing a glimmer of optimism for the market. Howes, at Deutsche Bank, says: "Today (Thursday) is almost a normal market in Europe. The infrastructure for the US CP market is not in place, but we hope it will be back early next week."

Itay Livni walked to work on Tuesday from his East Village apartment, just like he always does. The stroll through Chinatown, watching the produce trucks unload their goods, gives him a chance to clear his head, and also to experience a bit of the real world before entering a land of numbers and probabilities. "Once you enter the building, you don't see anything," he says. Well, not on a normal day, anyway. Livni, an options trader on the American Stock Exchange, works for Tahoe Trading, a market maker based on Rector Street, a couple of blocks south of the World Trade Center. The building, an old and ornate stone skyscraper, also houses the thestreet.com.

Just less than 13% of the market was traded in other currencies. Seven were in Hong Kong dollar. Spintab closed a HK$80 million ($10.26 million) 23-month note, managed by HSBC. The trade pays a fixed coupon of 4.165% and interest is paid quarterly. Other names in Hong Kong dollar were Westland/Utrecht Hypotheekbank with a HK$100 million 15-month note and Credit Lyonnais Finance with a six-week HK$15 million trade. Singapore dollar saw demand for one-month trades from Development Bank of Singapore and Barclays Bank. And Deutsche Bank led a Swiss franc trade for Vorarlberger Landes- und Hypothekenbank. The Sfr200 million ($119.96 million) note was non-syndicated although the details were made public and it pays interest at libor flat. Volvo Treasury closed a Czech koruna note for Kr500 million ($13.27 million). The note matures in 2006.

Only three trades were completed in other currencies. Commerzbank went out five years with its £

Seven trades came to the market in other currencies: three in Hong Kong dollar, two in Singapore dollar and one in Swedish krona. But all kept to the short-term. The Development Bank of Singapore was responsible for two one-month Singapore dollar trades. The smallest trade was a S$200 thousand ($110 thousand) note that will be issued on September 25 2001 and the largest trade was a S$240 thousand note that will be issued on September 27 2001. Commerzbank's Skr27 million ($2.56 million) trade will go out a little longer. The note will be issued on September 27 2001 and will pay a single final coupon of 23.20%. The note matures on November 21 2002. The other three notes in the market came in Hong Kong dollar. HSBC issued two HK$80 million ($10.26 million) two-month trades. The notes will both be issued on September 20 2001. MSDW also stayed short with its HK$100 million three-month note that will be issued on the December 21 2001.