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Martin Fridson, chief high yield strategist at Merrill Lynch in New York, expects high-yield spreads to treasuries to narrow 25 basis points in the event of a 50 basis point cut in short-term rates, which is expected this week. The move reflects the thinking that a cut will drive investors into junk funds in search of yield, and that low rates make it cheaper for dealers to borrow money to take on inventory, thereby improving secondary market liquidity.

A series of small trades of Harnischfeger Industries' bank debt has pushed the price up to 50 as the market smells an exit from Chapter 11 bankruptcy soon and vultures see an equity play. Ken Hiltz, cfo, said the company recently went through three days of confirmation hearings in bankruptcy court. "We're just awaiting a judge's decision. We're optimistic about it," he said, adding that the company submitted a reorganization plan in December to its creditors and that it was voted on and approved.

The hedge funds sector is starting to move toward getting public rating, motivated in part by mitigating fears of counterparty risk. Nevertheless, counterparty ratings by Standard & Poor's and Fitch Inc., as well as ratings of the hedge funds themselves by Fitch, can provide the greater openness for which institutional investors are looking.

IMC Global is seeking a $500 million credit facility to pay down an existing $800 million credit. Company officials are also currently on a road show to issue $500 million in bonds, to pay down existing debt. The new deal will break down into a $250 million revolver and $250 million term loan "B". The loan deal mature in five years. According to Dave Prichard, v.p. investor relations, the new deal has more flexible covenants as compared to the existing facilities. "We view the financing as something that will improve our flexibility with more relaxed covenants," he said. The Lake Forest, Ill.-based company makes fertilizer and livestock feed.

The $230 million refinancing credit for Insignia Financial Group, Inc. is set to close imminently, according to Frank Blanton, v.p. with the New York-based real estate services firm. The three-year revolver, priced at LIBOR plus 2 1/4 %, is a renewal of a previous facility, which will be used for working capital requirements, said Blanton. First Union is administration agent, Lehman Brothers syndication agent and Bank of America documentation agent. These banks had existing and longstanding relationships with Insignia, though B of A is new to a primary role, he noted.

There was a Street trade at 901/4 late last week of a $5 million chunk of Owens Illinois' revolver. While levels are up, dealers say they have topped off due to bank pressure. "A lot of banks have oversized positions and will sell down," said a dealer. Another commented, "It feels like the bank pressure is at the 90 to 92 level. There's just lots of potential supply."

The Australian new issues market is set for a small flurry of activity, following the conclusion of the Transfield Services IPO, the stabilisation of the Australian market and recent rally in the local currency. However, the prospective deals are relatively small and the equity new issue market remains slanted towards secondary market deals rather than IPOs. Moreover, the IPOs remain largely below the size that would entice international fund managers.

Morgan Stanley won a four way bid against Crédit Lyonnais Securities Asia, ING Barings and WI Carr for a bought deal of $200m, plus a $30m greenshoe for China Resources. Morgan Stanley was in the market yesterday (Thursday) selling the bonds on terms which the bank deemed fair but which some market participants believed were overly aggressive. The five year notes rank senior unsecured and Morgan Stanley reported that the implied credit rating of China Resources is BBB-. The zero coupon notes have a yield to maturity of five year US Treasuries less 68bp, based on the par issue price and 121.78% redemption price. The conversion premium is 18.11%, based on a conversion price of HK$15 per share.

Launching its fourth subordinated debt transaction in less than two years to an upbeat market reception, the Development Bank of Singapore (DBS) proved that it continues to retain strong international investor confidence in its expansionist corporate strategy. The Aa3/A- rated bank launched its $850m non-call 10 year upper tier two sub debt issue yesterday (Thursday) to a strong market reception, demonstrating the continuing confidence in the institution, following its takeover of Hong Kong-based Dao Heng Bank. Total orders had amounted to over $1.3bn before the transaction was priced.

Helix Capital (Netherlands) has signed a $5 billion asset-backed MTN programme. Bank of America Securities acts as the sole arranger and dealer. Fitch has assigned a rating of BBB to the floating-rate notes off the programme, which mature in 2006.

Satyam Computer Services, India's fourth biggest software exporter, will today (Friday) launch its roughly $130m American depository receipt (ADR) issue through lead manager Merrill Lynch. The company will sell 12.5m ADRs representing 25m ordinary shares and will list on the New York Stock Exchange.

Swiss Re Capital Markets this week closed a $120m catastrophe bond that transfers the risk of windstorms in France and a hurricane in Florida or Puerto Rico into the capital markets. The deal is the first to securitise hurricane risk in Puerto Rico and it is also the first to provide using a catastrophe bond - what is known in the insurance world as a reinstatement.