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Societe Generale Australia was on the ball when the bank spotted the opportunity to arbitrage between spread widening for auto sector credits in the US dollar market and spread widening for that sector in Australia. For the first time in the Australian market, the bank came up with the idea to buy US dollar bonds, repackage them into Australian dollar notes and sell them on to local investors. But while the bank was marketing the deal, auto sector spreads at home blew out, leaving bankers wondering if SG made a turn on the deal or hit the skids. In early March, SG Australia used its multi purpose ACE Funding securitization vehicle and sold A$100 million (US$49.1 million) of term market bonds to local Australian investors collateralized by global US dollar bonds that had been issued by Ford Motor Credit. The underlying Ford bond pays a fixed rate coupon semi-annually, but SG repackaged them as quarterly pay floating rate notes.

Even the most ardent devotees of disinvestment in India were stunned when, in late February, government-owned Bharat Aluminium announced the sale of 51% of the company for Rs5.15 billion (US$110.5 million) to Sterlite Industries. More predictable was the labour strike that ensued – opposition to strategic sale is still strident in the country. Sterlite's bid was double the sum offered by Hindalco, part of the Mumbai-based Aditya Birla group, and far ahead of the other short-listed bidder, Alcoa of the US. Other foreign companies that had initially shown interest, including Kaiser Aluminum, BWA of Germany, Norsk Hydro of Sweden and the UK's Billiton, were not in the reckoning.

India's stock markets crashed spectacularly at the beginning of March and the sector has since taken on the plot of a Bollywood film script – with industry rumours, allegations, and shock resignations at government level all fuelling the spectacle. The BSE 30 Sensex (the Bombay Stock Exchange's sensitive index) lost nearly 13.5% between February 28 and March 20 as it dived from 4,247 to 3,672. March 20 also saw the lowest trade volume in recent years – Rs10 billion (US$214.6 million) – a tenth of daily trades prior to March 1.

Japan's Government Housing Loan Corp (GHLC) stepped confidently into the residential mortgage backed securities (RMBS) fold last month, sparking hopes that Japan's securitization market is expanding. Touted as a benchmark deal, it represents the first agency deal not guaranteed by the government. Joint led by CSFB, Goldman Sachs and Sanwa Securities, the corporation floated ¥50 billion (US$406.8 million) worth of mortgage loans. This should be followed by similar transactions each quarter with GHLC planning to issue ¥200 billion in mortgage backed securities each year – small by comparison to the agency's holdings, but a significant development nonetheless.

Australia's largest radio broadcaster, Austereo, has yet to trade at its reduced issue price of A$1.85 (US$0.92), lending weight to the belief that its recent float was not only overpriced, but failed to take into account mounting competition in the radio market. Analysts say the threat of competition from rival DMG Radio was mistakenly overlooked – or well covered up – during the run-up to the float. The deal, which started out as a bookbuild, raised some A$67 million less than expected – a figure that was well short of Austereo's expectations and those of its parent, Village Roadshow. Global lead managers were Merrill Lynch, Credit Suisse First Boston and Macquarie Bank. Co-lead managers were Salomon Smith Barney and CIBC.

Investors Management Group is planning a spending spree of up to $300 million in seasoned 7.50% conventional MBS pass-throughs over the next several weeks because it thinks the refinancing wave is over and mortgage rates will begin to back-up. Kathy Beyer, portfolio manager of the Des Moines, Iowa-based fund, says the timing reflects the fact MBS have under-performed year-to-date, and are poised for a rally should Treasuries continue to pare the gains they've made in the first quarter. This would bring her MBS allocation up to a neutral weighting on her firm's $2 billion bond portfolio, from 20% to 35%. Also, the refinancing wave that hit MBS so aggressively in the first quarter--the Freddie Mac survey of 30-year mortgage rates is now at 6.89%--makes seasoned bonds, or paper that has survived several pre-pay waves, more valuable.

Up-front fees on both pro rata tranches and institutional tranches reached their annual highs as fees on pro rata pieces jumped up to 5.2 basis points and fees on institutional pieces to 3.1 for March 2001. According to Portfolio Management Data, fees on pro rata tranches from the three months ending March 2000 were 2.9 basis points and fees on institutional tranches were 2.1 basis points for every one million dollars committed in March 2000.

Allied Investment Advisors, a Baltimore-based investment firm, will rotate from Treasuries into ABS when it thinks the Federal Reserve is done lowering interest rates, according to portfolio manager Wilmer Smith. Smith, who oversees $300 million of the firm's $7 billion in fixed-income assets, argues this will probably not be until the May 20 FOMC meeting, and he is anticipating an inter-meeting rate reduction. But, when the Fed is finished, he is ready to rotate 5%, or $15 million, of his short Treasury position into liquid AAA ABS credits in the HEL sector.

Grantham, Mayo, Van Otterloo & Co. has been buying the commercial loans of the Republic of Algeria, as well as Russian Federation 30-year Brady bonds, on the view that they provide both safety and high total return.

Buysiders gagging on telecom and hungry for industrial and healthcare deals are now being pinched by a bond market that is becoming more welcoming and sapping bank loan tranches. The latest example is DaVita, Inc., an acute healthcare provider, which decreased its $500 million bank deal to $425 million last week while maintaining its $200 million bond deal. "The high-yield market is hot for healthcare," said Richard Whitney, cfo of DaVita, explaining why the company decided to go to the bond market as it refinanced its credit facility. "We still could have gotten the deal done [if bonds weren't an option], but a larger percentage would have gone into the "B," he said.

A number of buysiders were taken aback by last week's 10-15 basis point tightening in corporate spreads during another round of equity market turmoil, and some are forecasting there may be further tightening. "It's rather unusual to watch a corporate rally when stock prices go down," says Greg Habeeb, portfolio manager at Calvert Asset Management Group, who runs $2 billion assets for the Bethesda, Md.-based firm. Players put the tightening down partially to technicals, as some Street firms were caught short in the final week of the quarter, and positive fund flows in to the mart.