Caisse des Depots et Consignations (CDC) is about to establish a EURO5 billion securities arbitrage asset-backed commercial paper (ABCP) program, sources said.

The multi-currency facility, which will span the Euro-CP, U.S.-CP and billets de tresories markets, is called Altitude Funding Ltd. The program should sign in the coming weeks, when further details will be disclosed.

ABCP programs have been somewhat of a rarity this year, but the market has offered safe havens to buyers looking to escape spread volatility in recent months. Ratings downgrades were more influential in the U.S.-CP market than in Europe, but ECP spreads did not escape totally unscathed.

A2/P2 spreads ballooned in the U.S. but are now edging back. Oversupply was a major cause - a factor mainly of downgrades - but there were also a few new borrowers, and these combined to weigh on the tier II market. One example of this was DaimlerChrysler (DCX), which was lowered to A2/P2 at the end of February.

As more and more borrowers are pushed into the tier II market, the level of debt becomes unsustainable. DCX, which had a daily average outstanding of $17.8 billion during the final quarter of last year in the U.S., found itself in the position of having to cut back levels because of the uncertainty surrounding the rolling over of debt.

Where the ABCP markets offer stability is that the majority of programs are limited in terms of what assets can be invested in, many setting the limit at the upper-end of the rating scale.

An interesting development in the European ABCP market is the appearance of a corporate as a conduit sponsor. Siemens is the first European corporate to sponsor an ABCP program. Its conduit is a E10 billion Global ABCP called Siefunds Corp.

The next stage in CDC's plans will be to establish a multi-seller conduit that will securitize pan-European trade receivables.

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