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According to plan, the Federal Reserve lowered interest rates by 50bp at the FOMC meeting this week. This was the least that the market had expected, but the steady procession of deflationary data released over the last few days kept the rally alive. Another 50bp cut is now confidently expected at the next FOMC meeting, if not before. Swap spreads narrowed sharply as the market rallied. Moreover, the five year versus 10 year spread relationship disinverted to a positive relationship once again. At the close yesterday (Thursday) the 10 year mid-market was at 82bp while the five year was 81bp.

Deutsche Bank has given more details of its intended restructuring, as Vorstand spokesman Rolf-E Breuer announced healthy results for financial year 2000 at a press conference yesterday (Thursday). The proposed changes, which will involve the loss of 2,600 jobs worldwide, will see the bank's operations divided into two groups - the corporate and investment bank (CIB), which will be headed by Joe Ackermann and Carl von Boehm-Bezing; and the private clients and asset management group, headed by Breuer. Services provided to all units of Deutsche Bank will be combined as DB Services, while industrial holdings managed by DB Investor are being combined with private equity and venture capital activities in a corporate investments group, which Breuer will head.

Turkey has made a cautious first approach back to the international bond markets with a Eu500m three year offering through ABN Amro and CSFB. The deal is the first since the liquidity crisis in its banking sector caused spreads to skyrocket last November. The transaction had a coupon of 8.25%, and was sold at an issue/reoffer price of 99.50, producing a spread of 390bp over the equivalent maturity Bobl 130.

Iceland Joint arrangers Íslandsbanki-FBA and Landsbanki Íslands have signed banks into a $68m project financing for Smaralind, a new shopping centre under development in Reykjavík.

SNS Bank has increased its already-strong presence in the Euro-MTN market by signing another programme in the name of its parent, SNS Reaal Group. The euro1 billion ($926.91 million) debt issuance programme was signed on January 18 at the same time that it completed its update to its original programme (See last week's MTNWeek). "SNS Reaal Group is a different animal - it's a pure holding company," says Bas Snijders, SNS Bank's director of funding. "The new programme is to facilitate funding at group level." SNS Reaal Group is the parent company of SNS bank, SNS Reaal Verzekeringen and SNS Reaal Invest - the banking, insurance and investment arms of the company. The Group is rated A- by Standard & Poor's and A3 by Moody's, one notch lower than SNS Bank because the assets of the group are no more than the 100% stakes it holds in its subsidiaries. The first trade off the new programme has already been launched: a euro5 million eight-year trade via Credit Suisse First Boston, which is not one of the appointed dealers. The trade is linked to a basket of stock indices. Snijders says that the programme will be used to mainly issue private notes and he hopes to raise between euro250 million to euro300 million in the first quarter of 2001. The arranger is ABN Amro. The dealers are BNP Paribas, Deutsche Bank, Goldman Sachs, ING Barings/BBL, Merrill Lynch, Nomura, Rabobank, and Salomon Smith Barney. SNS has also appointed four further dealers for marketing reasons. They are Bayerische Landesbank, Caixa Geral de Depositos, Erste Bank and SNS itself. They make up the informal European Savings Bank Group and are of the same status as the main group.

* Bank Austria AG Deficiency guarantee from: City of Vienna

Market report Compiled by Vusi Mhlanzi

Bombardier, the third largest global civil aircraft manufacturer, has awarded the mandate for its inaugural euro and sterling transactions to ABN Amro, CSFB, Deutsche Bank and global co-ordinator JP Morgan. The company will be the first Canadian investment grade corporate to tap the euro market. Bombardier will start roadshows in Europe on February 5.