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Buying and selling options on variance has started in earnest, as the volatility environment is less certain and the instruments are becoming more widely traded. The structures, first traded just over a year ago (DW, 10/1/04) pay out the difference between the strike and the realized variance on a variance swap of the same maturity and size as the option. More trading also means the premiums for these exotic options are coming down, which makes them more attractive to buyers.

Markit Group, the credit research and pricing service, has made a trio of hires to support the launch of the ABX and CMBX indices. Ben Logan, ABS product manager, said the firm has made the hires to both help build out the indices and to market them to buy- and sell-side clients. Nathan Kirk, previously a salesman at Barclays Capital, comes on board as head of European ABS, responsible for managing its pricing service and sales to European clients. Keith Corr joins in New York from Dresdner Kleinwort Wasserstein to manage the ABX and CMBX indices. Logan said Markit has also added a junior analyst, Nick Fusco.

Calpine Corp.'s $2 billion debtor-in-possession financing broke Friday and the second lein traded up to 103, bucking any concerns about its pricing and relatively light security.

All bankers out there; take note. With Moody's Investors Service saying default rates are going to rise in 2006, it might be wise to look into some of the methods of The Jammu and Kashmir State Financial Corp. in India. In cases of non-compliance, the JKSFC will not only seize the defaulter's mortgaged properties and take legal action, it will also send officials to the defaulter's residence and business to beat drums nonstop and publish their photograph in the newspaper. Defaulters, you've been warned.

Investors buying into the JPMorgan and Lehman Brothers-led financing for Dunkin' Brands are making an unusual short-term play that will have them paid off in about three months.

A proposed deal between Allied Capital and its asset management subsidiary, Callidus Capital Management, to buy Katonah Capital Management was called off.

This chart, provided by Citigroup Global Markets, tracks bid-ask prices for par credit facilities that trade in the secondary market.

Jeff Layman, director of investment services at BKD Wealth Advisors, a Missouri-based firm with more than $1 billion in assets under management, is shying away from corporates and is looking to shorter agencies in an attempt to lower his duration.

--Jeff Wolinsky, analyst at Standard & Poor's, on the subordination of Calpine's $2 billion debtor-in-possession loan to some of the energy company's pre-petition secured debt.

SunTrust Bank has hired Corey Pinkston to run high-grade bonds and John Gregg to run loan syndications.

The following charts show the top five advancers and decliners in terms of % moves in the loan, bond and credit default swap markets for the previous week.

--Todd Kushman, managing director and product specialist for derivatives of asset-backed securities at Bear Stearns in New York, commenting on high levels of interest for super-senior tranches of ABS when leveraged. Before the addition of leverage, this tranche had almost only appealed to monolines.