Syndicate desks churned out a hefty helping of "step-up" notes yesterday, with over $1 billion issued.

Gary Perlin, senior vice president and treasurer at the Federal National Mortgage Association, which issued a total of $750 million of the notes through Merrill Lynch & Co. yesterday, said step-up notes carry two distinct coupons.

One coupon runs to the call date and another, higher, coupon kicks in after that date.

"The structure of the bond helps us achieve protection in both interest rate environments," Mr. Perlin said. "If rates go down we get to call it, if rates go up our long-term rate is fixed."

"I think agencies are getting more creative," a source at one syndicate desk said yesterday.

"They used to be very stodgy institutions," he said.

In secondary trading, high-yield bond prices moved up about 1/4 point, while high-grades also finished stronger.

Yesterday's New Issues

Federal National Mortgage Association issued $500 million of step-up notes due 1997 at par. The notes were priced to yield 5.6%, or 42 basis points over two-year Treasuries.

The notes are callable after the step-up date on 30-days notice. After two years, coupon on the notes steps up to 7.75%. Merrill Lynch & Co. managed the offering, which was increased from $500 million.

The Federal National Mortgage Association also issued $250 million of step-up notes due 1999 at par. The notes were priced to yield 6.31%, or 55 basis points over three-year Treasuries. After three years, the coupon on the notes steps up to 8.50%. The notes are callable after the step-up date upon 30 days notice. Merrill Lynch managed the offering.

Federal Home Loan Mortgage Corporation issued $150 million of 5.75% step-up notes due 1997 at par. The notes were priced to yield 55 basis points over two-year Treasuries. The coupon on the notes steps up to 7.625 after two years. Lehman Brothers managed the offering.

Niagara Mohawk issued $300 million of 8% first mortgage bonds due 2004. The noncallable bonds were priced at 99.04 to yield 8.126% or 77 basis points over 10-year Treasuries. Moody's rates the offering Baa2, while Standard & Poor's rates it BBB. Merrill Lynch lead managed the offering.

Federal Home Loan Banks issued $150 million of step-up notes due 1997. The notes were priced to yield 5.613% or 40 basis points over two-year Treasuries. On June 23, 1994, interest rate on the notes steps up to 7.86%. The notes are callable after the step-up date upon 30 days notice. PaineWebber managed the offering.

Deutsche Bank Financial issued $100 million of 4.34% medium-term notes due 1993. The noncallable notes were priced initially at par. Moody's and Standard & Poor's rate the notes triple-A. First Boston Corp. managed the offering.

K&F Industries issued $100 million of 11.875% senior secured notes due 2003 at par. The notes are callable after five years at 105.28 moving to par in 2001. Moody's rates the offering B1, while Standard & Poor's rates it B-plus. Lehman Brothers managed the offering.

Source One Mortgage issued $100 million of 9% debentures due 2012 at par. The noncallable debentures were priced at 99.537 to yield 9.05% or 116 basis points over 30-year Treasuries. Moody's rates the offering A3, while Standard & Poor's rates it A-plus. Salomon Brothers managed the offering.

Bayerische Landesbank issued $100 million of 4.33% medium-term notes priced initially at par. Both Moody's and Standard & Poor's rate the offering triple-A. First Boston managed the offering.

International Lease Finance issued $100 million of 6.625% notes due 1996. The noncallable notes were priced at 99.311 to yield 6.825% or 65 basis points over blended three-to five-year Treasuries. Lehman Brothers managed the offering.

Rating Action

Moody's Investors Service placed Georgia Power Co.'s debt ratings under review for a possible up-grade, affecting $5.3 billion of securities. Moody's noted improvements in the company's credit quality that may allow it to meet long-term capital spending requirements for Clean Air Act compliance without financial stress.

Debt under review includes: Georgia Power's Baal first mortgage and senior secured pollution control revenue bonds; Baa2 senior unsecured pollution control revenue bonds; Baa1 preferred stock; prospective Baa1 shelf registration of first mortgage bonds; and its prospective Baa1 shelf registration of preferred stock. The company's Prime-2 commercial paper rating is not under review.

"Having completed a major nuclear construction program, Georgia Power now has a more manageable construction budget that calls for completion of relatively inexpensive combustion turbines -- not base-load facilities -- over the next five years," the rating agency said.

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