Shearson Lehman Brothers Inc said ithas sold a new type of certificate of deposit designed to
provide top-rated Japanese banks with broader access to the
U.S. money markets.
    The investment banker said its variable money market
certificates of deposit are structured as traditional floating
rate CDs, with the rate based on the AA commercial paper
composite rate of the Federal Reserve Bank of New York.
    Shearson said it offered the novel CDs yesterday to mostly
institutional investors. The series totaled 500 mln dlrs and
was oversubscribed with nearly two billion dlrs in bids.
    The first banks to issue the variable money market CDs were
Sanwa Bank Ltd, Sumitomo Trust and Banking Co Ltd, Dai-Ichi
Kangyo Bank Ltd, Fuji Bank Ltd and Sumitomo Bank Ltd, each with
tranches of 100 mln dlrs, Shearson detailed.
    The investment banking firm said another series of variable
money market CDs is planned for April.
    "The variable money market CDs provide a low cost
dependable source of funds for issuing Japanese banks," said
Robert Shapiro, executive vice president with Shearson Lehman
Commercial Paper Inc. "The instrument enables banks to
diversify their funding base in a significant way."
    In yesterday's series, the issuing banks' coupon rates were
set at the commercial bank composite rate plus a spread which
is expected to equal an all-in-cost of LIBOR minus 10 basis
points, Shearson said.
    The rate will be reset monthly or quarterly and will be
subject to a maximum of LIBOR and a minimum of the New York
Fed's commercial paper composite rate.
    Shearson stressed, however, that the spread over the
commercial paper index to be paid by an issuing bank will be
determined by investor demand. It added that other Japanese
banks may participate in future issues.
    "For the first time, they (the banks) will gain access not
only to traditional CD investors but also to commercial paper
investors at rates which are competitive with traditional
floating rate CDs," said Michael Balaban, a vice president with
Shearson's commercial paper unit.
    He added, "For U.S. investors, the CDs are attractive
because they are domestically issued paper with competitive
rates offered by AAA-rated Japanese banks."
    Balaban noted that several fiduciary investors and money
market funds which had never previously purchased Japanese bank
paper submitted bids during yesterday's sale.
 Reuter
