Europe’s Bond Trade Is Beckoning the Bold – Wall Street Journal – 11/07/11

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FINDING A SEAM: Traders have jumped on the gap between yields on Levi’s bonds in Europe and in the U.S.

Investors and banks didn’t only dump the debt of European companies this summer. They also sold the euro-denominated bonds of international companies, creating an unusual gap between those securities and bonds sold by the same companies in dollars. By mid-October, investors could buy euro-denominated bonds of Levi Strauss at an 11% discount to the equivalent dollar bonds, says Sherif Hamid, a strategist at Barclays PLC. Mr. Hamid has been recommending that investors take advantage of the differentials, in part because the foreign-exchange hedging costs are minimal. They could also buy euro bonds of New Zealand-based Reynolds Group Holdings in October at a 15% discount to the packaging maker’s dollar-denominated debt. A spokesman for Reynolds declined to comment.

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