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The Texas Permanent School Fund is planning to add up to 2-3% of its portfolio, or $140-210 million, to corporate bonds over the next two or three months in a bid to add yield. Carlos Veintemillas, portfolio manager overseeing some $7 billion of taxable fixed-income in Austin, says he is looking at short duration single- and double-A credits. To finance the purchases, the fund will use the proceeds from prepayments in its mortgage-backed securities portfolio, and new cash from royalties the fund receives for oil and gas fields on public lands. Veintemillas says he is waiting for evidence of increased capital expenditures by companies before making the move.

Jaap Rademaker, v.p. in the structured transactions group at JPMorgan in London, has left the firm. Rademaker reported to Bertrand Des Pallieres, head of rates marketing and structuring at JPMorgan in London. Rademaker joined the firm a year ago in August (DW, 8/15) from Deutsche Bank in London, where he had a similar position. It could not be determined whether Rademaker had gone to a competitor. Des Pallieres referred calls to Eileen Darko, spokeswoman in London, who had no comment. Rademaker could not be reached.

Lehman Brothers is parachuting in Benoit Savoret, head of equities for Asia-Pacific in Tokyo, in a newly created role as head of European equity trading for both cash and derivatives to beef up its London-based operation. Lehman is reportedly revamping its equity derivatives business after plummeting global stock markets have resulted in a dismal year for equity desks, according to rivals. Francois Pham-Quang, head of European equity derivatives sales, who officially resigned last Friday but signaled his intention to leave last month, said the firm has decided to bring in Savoret to devote a senior manager to the group, in which he was the only managing director in the group.

Credit-default protection on Avnet Inc. doubled last week after Moody's Investors Service downgraded the distributor of electronic components and computer parts two notches to Baa3 and left it on negative watch. Five-year default swaps doubled to around 600 basis points Wednesday from around 300bps Monday, according to traders. A spread blow-out is expected after a two-notch downgrade, but traders said this widened even further than normal. "The theory is that with the downgrade to Baa3, it will disappear from a lot of CDOs, and the Street won't naturally own protection," said one trader. Hedge funds and loan portfolios were the heaviest buyers of protection last week.

Aberdeen Asset Management Asia, a Singapore-based fund manager, is preparing to launch its first hedge fund this week, in which it will consider using over-the-counter derivatives. Graeme Sinclair, investment director in Singapore, said once the long/short equity fund is up and running it will look at OTC instruments, such as equity options. "We'll discuss it then with our derivatives desk in London," said Sinclair, estimating the timeframe would be around six months. He declined to elaborate on its derivative plans. "We'll start out small," Sinclair noted.

BNP Paribas has agreed to make markets in JPMorgan's JECI 100 index. Antoine Chausson, head of structuring in the credit derivatives group at BNP Paribas in London, said the firms have agreed to a common term sheet and this should make the product more liquid. He stressed that clients are looking for independent products in which they know they can get tight bid/offers from competing firms.

Bear Stearns has hired Julien Petit, head of European derivatives sales at Bank of New York in London, as a managing director in the fixed-income derivatives marketing group, and plans to hire more sales professionals within the next few months. Morad Mahlouji, senior managing director and head of fixed-income derivatives marketing, said the hire is part of the firm's strategy to grow its fixed-income derivatives group in Europe. Petit started two weeks ago.

INVESCO Australia, an asset manager with AUD12.5 billion (USD6.81 billion) under management, is contemplating using credit derivatives for the first time. "It's something we're considering," said Lachlan Collander, investment manager of the interest rates group in Melbourne. Collander continued that the asset manager could be trading credit derivatives within six months. Currently, INVESCO has been following the development of the credit derivatives market in Australia and tracks where default-swaps trade in relation to bonds. He declined to comment further.

Pitney Bowes, an office equipment maker with roughly USD4 billion in annual revenue, is considering unwinding interest rate swaps to raise the proportion of fixed-rate debt in its portfolio. Dessa Bokides, v.p. and treasurer in Stamford, Conn., said the company plans to become more active in interest rate risk management given the likelihood that interest rates will not get much lower than they are now, and the company may unwind interest rate swaps to that end. "Pitney Bowes has always been risk averse, but the actual policy of actively managing the portfolio and changing the mix of fixed in floating is something new," she said, adding it is being done to protect the company against what she expects will likely be a trend toward higher interest rates.

Credit-default protection on German banks, including Commerzbank and Deutsche Bank has widened over the last two weeks because of rumors about the financial viability of Commerzbank and a negative ratings report from Moody's Investor Service on others. Traders said five-year credit-default swap spreads on Commerzbank blew out to 150 basis points/170bps on Wednesday compared with 80bps/85bps 10 days before. Five-year protection on Dresdner Bank blew out to 75bps/80bps from 50bps/60bps and swaps on Deutsche Bank moved to 60bps/70bps from 45bps/50bps over the past two weeks. Additionally, there were offers for protection on the subordinated debt of Hypovereinsbank at 200bps, with no bids. Weekly volumes have doubled in the past two weeks to approximately 20 trades for each credit. Spokeswomen at Commerzbank, Hypovereinsbank and Dresdner Bank in London declined comment. A spokesman at Deutsche Bank declined comment.

Interest in equity-linked notes in Japan has skyrocketed in recent weeks on the back of a slumping stock market, according to officials in Tokyo. "Issuance has picked up," said Jim Clark, head of equity trading at UBS Warburg in Japan. Equity derivatives professionals said as the Nikkei 225 has fallen below the 10,000 mark and recently hit 19-year lows at 8,983, more customers are looking to bet it is nearing its bottom. "A number of clients think the market will base around 9,000," said an equity derivatives sales head in Tokyo.

Bear Stearns and Lehman Brothers are pitching options trades which take a view on the severe drop in U.S. and European equity markets last week. Lehman is recommending a trade which is bearish on the Aussie dollar because it believes the currency tends to fall when there are uncertainties around global growth, since Australia is an export-driven economy. Bear Stearns, however, is suggesting a trade that predicts the U.S. dollar will weaken against the euro because of equity weakness, as well as other factors.