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Steven Jones, director fixed-income at Missouri Valley Partners, will swap $50 million, or 5% of the firm's portfolio, out of mortgage-backed securities into short-term corporates in order to avoid negative convexity given his concern over potentially spiking interest rates. Jones' reasoning is to avoid holding pass-throughs that will roll up the steep curve and lengthen in duration as interest rates rise. There is no trigger for this move, besides his assumption that the economy will improve, leading interest rates to move up.

This chart, provided by Citibank/Salomon Smith Barney Inc., tracks bid-ask prices for par credit facilities that trade in the secondary market. It also tracks facility amounts, ratings, pricing and maturities.

BNP Paribas Asset Management, which manages roughly E46 billion in fixed-income assets from its Paris office, plans to sell five-year government bonds across the board and buy only French government bonds in expectation of an imminent rate cut from the European Central Bank. Claude Guerin, portfolio manager, anticipates a 50 basis points cut from the ECB, which he says will cause the five-year portion of the yield curve to steepen and for the curve to flatten between the five- to 10-year area, because inflation will drop.

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Market professionals in Australia are furious over the government's proposal to buy back its debt, fearing the damage it will do to the interest rate swaps market. At first sight proposing that swaps become the risk-free benchmark looks like a gift for the instruments, but market professionals warn that removing the underlying liquidity could damage the AUD2.6 billion (USD1.46 billion) swaps industry.

Bank of China International, the investment banking arm of the Bank of China, has recently begun trading and marketing equity derivatives. "We've launched our Hong Kong platform," said Warren Kwan, head of equity derivatives in Hong Kong.

Banks, including Deutsche Bank, Dresdner Kleinwort Wasserstein and Rabobank, are looking at using carbon emission derivatives to reduce the cost of project finance loans. The firms would strip out the carbon credits and then either sell them as forwards and options or use them as a revenue stream for the loan. Justin Mundy, senior advisor in the global markets group at Deutsche Bank in London, predicted it would be offering these loans within a year. The major users will be power generators, oil refiners and heavy industry, according to Steve Drummond, ceo of emissions broker CO2e.com in London.

"We are agnostic, we will look at both cash and synthetic. What we are looking for is the best structure."--Mark Anson, cio of CalPERS in Sacramento, Calif., commenting on the firm's plans to invest in the equity tranche of a CDO. For complete story, click here.

Bear Stearns has hired Maurizio Raffone as a senior collateralized debt obligation structurer in London. Raffone, who joins from a similar position at Deutsche Bank in Tokyo, reports to Mark Moffat, managing director and head of the European CDO group in London. Moffat did not return calls.

British Gas Trading, a subsidiary of Centrica, has entered a GBP40 million (USD62.5 million) multi-season winter weather hedge that uses a daily collar structure, rather than the more traditional heating degree-day index, to determine season-end payouts. Gearoid Lane, head of electricity supplies at Centrica, said the collar structure allowed coverage to be more concentrated in particular high-risk months, such as January. "We were able to sculpt the coverage much more to our risk," he added. One weather official said collar structures are gaining in popularity because of that flexibility.

The California Public Employees' Retirement System plans to make its first investment in CDOs in the coming months. CalPERS, the U.S.' largest public pension fund, with assets totaling approximately USD136 billion, will likely invest USD25-50 million before year end, according to Mark Anson, cio in Sacramento, Calif.

Chubb Financial Products has hired Isabelle Bourdeau as director in U.S. marketing in New York, a newly created position. Bourdeau will focus on marketing and origination of deals, according to Matt Cooleen, executive v.p.-new product development and origination in New York. Previously Chubb staffers have had a broad range of responsibilities due to the small size of the firm. As the firm grows it is now recruiting specialists to focus on more specialized areas of expertise, with marketing and origination now being separated from product development.