With the implications of EITF 03-1 currently being digested by the fixed-income markets (see current issue of ASR), Citigroup Global Markets issued a report outlining the potential actions sell-side firms could take to limit the effects of potential write-downs of its available-for-sale (AFS) portfolio. The most likely action, Citigroup theorizes, is that underwriters will transfer most longer-dated bonds to book fixed-income trades in the trading (rather than AFS) account as well as to reduce duration exposure.

In addition, analyst Ethan Heisler offers seven other potential strategies banks may take, including incorporating asset swaps and structured repos as asset/liability management tools. To view the full document, CLICK HERE.

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