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Investor sentiment has soured dramatically over the past two months, with more fund managers now expecting growth to slacken and corporate profits to fall. A Merrill Lynch survey of 300 fund managers indicates that a net 32% are now negative about growth prospects and that a net 34% are negative about the corporate profit outlook, a significant turnround from March when investors were positive about growth and corporate profits by a net 11% and 4% respectively. Expectations have not been this low since 2001.

Turkey

Despite a more uncertain rate and credit environment, new issuers and investors continue to enter the covered bond market. As the boundaries between traditional and structured products blur, Asia and the US are the targets.

Banks have been trying to crack the CMBS market in Germany for years. Their success has been limited by the German banks' willingness to lend on their books and the conservatism of many borrowers. But the economic slowdown has taken its toll on banks, and private-equity houses are increasingly involved in German real estate.

FX settlement system CLS has responded to its member board's request to investigate the feasibility of adding a matching and netting facility for non-eligible currencies (NECs) and the settlement of FX option premiums, non-deliverable forwards (NDFs), interest rate swaps and credit derivatives. CLS Bank Settlement Members have been meeting with CLS to thrash out the design and the attractiveness of the inclusion of these more complicated FX-related products. While use of FX derivatives has grown, some banks have voiced concerns that the pace of growth is stretching their back offices. "FX players are now being squeezed between the conflicting forces of growth and the need to tidy up their operations," says Jonathan Butterfield, executive vice-president at CLS. "The optimal way to do this is to establish a level of standardization and use of common infrastructures collectively."

Negative returns

You can stop holding your breath now. Two months after Argentina announced the results of its exchange offer, the Second Circuit Court of Appeals in New York finally allowed it to go ahead, unencumbered by attachment proceedings from vulture funds.

Leveraged buyouts and auto company problems are taxing the minds of bond investors, but there's a more insidious form of event risk they should be wary of. Company executives, under pressure from boards and active investors including hedge funds, are starting to engage in financial engineering to try to boost their stock price. Bondholders are set to lose out. Antony Currie reports.

With banks more cautious about straight lending and bond spreads tight, real estate securitization through commercial mortgage backed securities is becoming increasingly popular, with conduit issuance taking a growing share of the market. Laurence Neville reports.

Goodyear Tire & Rubber

ECM syndicate merry-go-round BNP Paribas has hired Florence Sztuder from SG to replace Tom Kennedy, who left the bank in April, as head of equity syndicate.

What was it that Donald Rumsfeld famously said? "There are known knowns, the things we know we know. There are known unknowns, things we know we don't know. And then there are the unknown unknowns, the ones we don't know we don't know."