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The outstanding notional value of credit-default swaps has grown by 31% in the first six months of the year, while the combined interest rate and currency swaps market has grown 14%, according to an ISDA mid-year flash survey.

Macroeconomic risks are among the most important risks to the incomes of firms and individuals. For financial market participants as well, views on the distribution of possible economic outcomes are critical for asset allocation decisions and risk management. The last 12 months has highlighted the influence of economic data in shaping these views, as investors have struggled to interpret the trajectory of the global economy.

"We are getting significantly more money, more subordination and a larger role in selecting the names."--Michael Schozer, managing director in structured finance and credit derivatives at Ambac Assurance Corp. in New York, commenting on the impact of confusion over the restructuring definition and Financial Security Assurance pulling back from the CDO market. For complete story, click here.

The South Carolina Public Service Authority, one of the largest U.S. state-owned utilities with USD2.2 billion in debt, may enter its debut interest rate swap on the back of a recent multi-tranche USD440 million debt offering. Although there is not a natural need to convert the debt to a floating-rate liability, as the new fixed-rate bonds were sold to refinance more expensive outstanding fixed-rate bonds, according to Rod Murchinson, treasurer in Moncks Corners, S.C., the utility would consider executing its first interest rate swap because of the potential for interest rates to fluctuate during the life of the bond, part of which has an 18-year maturity.

Intrawest Corp., a sub investment-grade developer and operator of ski resorts across North America with annual revenue of almost USD1 billion, is considering using over-the-counter derivatives to mitigate foreign exchange and interest rate risk related to a USD137 million bond deal it sold earlier this month. Dan Jarvis, executive v.p. and cfo in Vancouver, British Columbia, said the company is "in the throes" of examining whether to enter fx options, interest rate swaps or a cross-currency interest rate swap.

U.S. dollar/yen risk reversals fell sharply last week, tracking the spot market as the dollar rose to its highest level in months against its far eastern counterpart. Twenty-five delta risk reversals had plummeted to 0.55 vol in favor of yen calls/dollar puts by Wednesday in New York, from 1.2 vol for yen calls/dollar puts a week before. Spot moved from JPY121.70 Monday to as high as JPY123.40, it later settled at JPY121.60 late Wednesday after the Bank of Japan said it would buy stocks from its ailing banking system.

This article examines the impact of removing restructuring as a trigger event in the credit-default swap contract. It concludes that removing restructuring would be constructive and lead to greater market liquidity. It would likely shave off 10-20% of the premium. However, it is looks at alternatives for market participants who need restructuring.

UBS Warburg is considering setting up a fixed-income derivatives operation in Taiwan as the local asset-backed securities and structured bond market increases. Philip Tsao, managing director and joint head of the Asian debt capital markets group in Hong Kong, said, "A decision should be made by early next year."

Yorkshire Building Society has entered a foreign exchange swap to convert its first euro-denominated issue into sterling. Chris Parrish, group treasurer in Bradford, U.K., said the exchange rate for conversion of the EUR500 million (USD484.65 million) bond offering was set on Sept. 11 at the forward exchange rate for Sept. 26, when the offering will settle. That rate was approximately EUR0.6275. Yorkshire Building Society needs to convert its funding into sterling because its lending portfolio is denominated in sterling, Parrish added.

Anchorage, Alaska-based GCI is exploring the feasibility of bringing back to market an institutional loan that was pulled this summer amid the growing telecom mess, and the company knows any return trip will be expensive. "If we go for a refinancing, the pricing will definitely be higher than the pricing quoted in the summer," said Bruce Broquet, GCI's v.p. of finance. GCI has credit facilities coming due in July 2005, but is going into the amortization phase of the lines, he said. By refinancing early, GCI can increase free-cash flow and go after new business, he explained.

GE Capital Corp. stepped in and bought $235 million of bonds for Global eXchange Services, the business-to-business company being sold to Francisco Partners by General Electric, once the private-equity firm decided to skip the bond market. This unusual tactic is leading some investors to be even more wary of the $210 million loan that backs the transaction and is led by Credit Suisse First Boston. "This was certainly not plan A," said one banker, who noted that the 121/ 2% coupon on the bonds "is pretty expensive." One buysider, meanwhile, said "GXS is going to struggle and I cannot see it happening at LIBOR plus 33/ 4%." A GXS spokesman referred questions to a GE spokesman, who declined comment. A spokesman for Francisco Partners also declined comment on the deal.