While just a few deals came to market last week, there was a fair amount of volume, due to large transactions: three in the $1 billion-plus range.

From May 4 to May 10, five deals priced for a total of just over $4 billion.

Swap spreads moved out five to six points over a one-day period last week, the result of a change of benchmark from the old to the new five-year Treasury.

"What happened was they went to the new benchmark, which happened to be five points basis richer than the old benchmark," a trader said. "I noticed it today, I said Wow, five-year swap spreads are really moving out.'"

Though swaps appeared to be gapping, the movement was considered a non-event: were there not so much attention paid to swaps of late, the movement might have gone unnoticed.

Bid for short-term paper remains strong, as Wall Street is anticipating another rate hike, said market watchers. Still, floating-rate paper is in strong demand, especially on the shorter maturities, demonstrated by strong pricing on the student loan deal brought by Secondary Market Services.

"We were extremely pleased on the execution - short floaters are definitely in demand," said Cheryl Watson, senior vice president and chief financial officer of SMS.

The three-part deal was co-led by Deutsche Bank Alex. Brown and Merrill Lynch. A 3.0-year, $200 million A-1 class priced one point inside the talk of three-month-Libor plus nine area. The 7.1-year, $958 million A-2 class priced at three-month Libor plus 20, dead center of guidance.

Even though in January SMS priced its A-2 class notes at Libor plus 19, Watson said the company sold its notes at 20 over to maintain the diverse investor base.

"I think the market's a 19, 20 market," she added. "We probably could have tightened to 19, but we would have lost some investors. Part of our overall program is to increase the liquidity of our bonds, and that means placing them in the hands of a broader group of investors."

As with the January transaction, where SMS redefined the way student loan deals are structured (with Sallie Mae following the lead ever since), last week's deal was structured as an uncapped floater, which is an important feature because it attracts a larger group of European investors.

In the secondary, $100 million in five-year Discover credit-card bonds traded mid-week in the broker market, according to published reports.

"As far as large trades go, that's a lot of bonds to be traded," said one market source. "We haven't seen that kind of trading in the five-year sector for a while."

Like the strong execution of SMS, last week's activity in the five-year area was also indicative of the demand for floaters, as the broker-dealers who bought them "had some place to go with them retail."

"It's strongly indicative of retail demand for five-year, and floaters in general," the source said.

At press time, Nissan was said to be preparing an auto lease-backed transaction, the company's first ever. The deal is rumored to be in the $1 billion range, managed by Merrill, and structured as a 144A.

Also, Countrywide, just on the tail of its last $550 million deal, was showing investors a $1.3 billion, multi-tranched, senior/mezzanine/subordinate home-equity deal.

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