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Although Italy may be increasingly snapping at its heels, Spain is still widely regarded as the country which has done the most over the last few years to act as the standard bearer for European sub-sovereign debt as an asset class. Since the Autonomous Community of Madrid set the ball rolling in June 1992 with a 12 year yen issue, five other authorities - Catalonia, Valencia, Andalucia, the Basque Country and Galicia - along with the cities of Barcelona and Seville have all followed suit by launching international bond issues.

In the first half of 1999 investors hungry for sub-sovereign paper will have a rare chance to welcome a clutch of Italian municipal issuers to the capital markets. Buyers can look forward to Euro-MTN programmes for the province of Naples and the city of Rome in March, followed by another programme for Florence, while Venice and Milan are also preparing to issue.

Chris Coles, head of acquisition finance at Barclays Capital, says that in January his bank "looked at more deals than we have looked at in any previous month", which appears to be proof positive that the UK corporate restructuring story is alive and well.

Corporates have become the darlings of the European bond market. New issuance is running at record highs as investors look for paper yielding decent spreads at a time when government bond yields are low.

Europe's regions and municipalities have long been predicted as likely entrants into international capital markets. The advent of the euro has given added impetus to developments prompted by growing decentralisation across Europe. And some headline authorities have made highly successful debuts in a variety of markets, from the Eurodollar to the Yankee, and now the euro.

While the European municipal market is starting to evolve, and bonds from large cities and regions offer an asset class with near-sovereign risk, there are thousands of municipalities which are too small to issue on their own.

Any doubts about the long term commitment of the Labour government to eventual adoption by the UK of the single European currency were dispelled towards the end of February.

The bond market for French local authorities is either one of the principal growth areas in the European municipal market or it is stuck in an impasse in which recent volumes have flattered to deceive. CDC Marchés - which stopped straight lending to French local authorities following the privatisation of Crédit Local de France - is firmly in the camp of the optimists.

If federalism means diversity, then this equation is more then proven by Germany's Länder, who continue to disagree about their approach to international capital markets.

The sector was one of the first to recover from the financial turmoil last year and issuance has been coming from a wide variety of sources -- with borrowers taking advantage of the lack of government bond supply, and the broadening of the investor base, to launch ever larger deals.

The European high yield debt market has yet to recover from the sharp falls suffered in last autumn's turmoil. But there are plenty of deals in the pipeline.

Leading UK fund managers are rushing to put together high yield funds, believing that the asset class offers a highly attractive risk-return profile. And new investors are coming into the market all the time, from both sides of the Atlantic.