With interest rates unsettled and most of the market away for the Thanksgiving holiday, the small amount of derivatives action within the last week was dominated by forward swaps activity. But heavy bond issuance in upcoming weeks could provide fertile ground for embedded derivatives in the primary market.

Birmingham, Ala., plans this month to use a forward swap agreement to effectively refund debt that cannot be advance refunded. The city has agreed to issue $75 million of variable-rate general obligation debt in 1997 and, simultaneously, enter an interest rate swap. The transactions, which will occur when existing debt can be refunded, together create a synthetic fixed rate for the city.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.