American Amalgamated wants to issue 10-year euro

American Amalgamated wants to issue 10-year euro denominated debt. They can currently issue US debt at a spread of +175bp over 10-year US treasuries. They can issue 10-year debt at a spread of +200 over 10-year euro treasury bonds. They can issue euro 10-year debt at a spread of +100bp over 3-month LIBOR. Deutsche Bank can issue 10-year floating US debt at a spread of +50 over 3-month LIBOR, 10-year fixed at a spread of +100 over 10-year treasuries, and 10-year euro bonds at a spread of +100 over the euro treasury bond. a) Why might American Amalgamated want to issue euro denominated debt? Why might it want to issue fixed rate debt? b) Why might Deutsche Bank prefer floating rate debt? c) Describe a swap agreement which reduces the financing costs of both parties assuming the swap bank wants at least 10bp to broker the transaction.


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