| Issuer: Fannie Mae Amount: ¥100 billion Maturity: 3 years 6 months Coupon: 2% Launched: May 14 Lead managers: Nomura, Merrill Lynch Quite a few mouths stood agape when Federal National Mortgage Association, better known as Fannie Mae, re-opened the international Euroyen market in mid-May. Not least because international investors bought a bond that offered only a 2% coupon - the lowest ever for a global issue. The deal was driven by technical conditions which not everyone was in a position to spot - they combined a mixture of swap arbitrage, a subtle shift in sentiment among international investors towards yen, the need for existing investors to switch out of Japanese government bonds (JGBs), and the desirability of creating a new benchmark, the last having been issued by the World Bank in November 1994. Nomura had the idea, which partly stemmed from a long position in short-dated JGBs that it built up in February, for reasons explained below. Nomura estimates that it controls 25-30% of secondary market trading in Euroyen, and talks daily to a broad range of investors. Feedback from its salesforce at the beginning of April suggested that European investors, particularly UK-based index-funds, had started re-weighting their portfolios. |