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Piedmont Capital Management will look to add some $15 million to the beaten up utility sector, using either new cash as it comes in, or proceeds from U.S. callable agencies as they mature or receive attractive bids. Walter Campbell, portfolio manager of $100 million in taxable fixed-income, says he is attracted by the sizeable yields available in the sector. He believes execution risk is already priced into the credits, as they look to sell assets to reduce leverage. He does not know when he will receive new cash, however, as most of his clients are small insurance companies, whose cash flows are unpredictable, he says.

Carlos Veintemillas, portfolio manager with Texas Permanent School Fund, will rotate $225 million, or 3% of the firm's portfolio, from Treasuries into agencies, in order to pick up additional yield, bring his debenture allocation more in line with the index and reduce duration. He says the move will be triggered once 10-year agency bonds--which last Monday traded at a spread in the low 50's over the curve--widen by 20 basis points to a 70 basis point spread. By doing so, Veintemillas also wants to bring his agency allocation from 7% to 10%, closer to the 12% weighting of the Lehman Brothers aggragate index.

Aashish Ponda, head of credit derivatives for Asia ex-Japan at ABN AMRO in Singapore, has resigned, according to officials at the firm. "He focused the team on structured transactions," noted one credit derivatives trader at a rival firm, noting that ABN put its emphasis on structured credit transactions rather than market making in default swaps.

The International Swaps and Derivatives Association is in the early stages of forming a steering committee for the development of a standard weather derivatives confirmation, according to Ross McIntyre, director, weather risk at Deutsche Bank in London. He added that Deutsche Bank wants to be actively involved in the process because the market needs to have one standard to make it more efficient.

KBC Alternative Investment Management has hired Dan Jones from KBC Financial Products to adapt one of JPMorgan's proprietary models, which focuses on hedging credit risk via equity, for KBC's systems. Andy Preston, fund manager, said the hedge fund team, which runs two funds with USD650 million in capital, has been studying using equity derivatives to hedge credit risk. He explained this is a natural progression from solely using credit-defaults swaps for convertible arbitrage, as convertibles stand naturally between the two asset classes of debt and equity. Preston said the most common form of this is to buy equity puts.

ABN AMRO plans to merge its global cash and credit derivatives trading groups. The group will be headed by Niall Cameron, managing director and global head of credit trading and debt syndication in London. Cameron said he will finalize the rest of his team over the coming weeks.

AEP Energy Services, the European wholesale energy marketing and trading subsidiary of American Electric Power, has received internal approval to start trading weather derivatives in Europe and plans to pull the trigger on its first trades in the coming months. Thor Lien, managing director in Oslo, said AEP will concentrate on structured products, such as precipitation index swaps for hydroelectric power plants. He added the energy company will also structure products linked to temperature and, if there is demand, wind speed.

Alliance & Leicester, with approximately GBP2 billion (USD2.92 billion) in capital, is considering entering the credit-default swaps market for the first time. An official at the Leicester, U.K.-based mortgage bank said it will use credit-default swaps if it determines there is no significant documentation risk. In addition, the bank would be looking at writing protection for high-grade entities. "It is all about certainty," he said, explaining that the bank would like to see clearer documentation of what defines a default and tightening of the cheapest-to-deliver rules. It is unlikely to enter the market within the next six months, he added.

One-month euro/dollar implied volatility rose last week as the euro appreciated against the dollar and reached levels not seen since Sept. 17. Implied vol reached 9.5% last Wednesday from earlier in the day when it was at 8.55%. Leveraged accounts were buying euro calls with strikes at USD0.935 when spot was trading at USD0.92, traders said. The single European currency was trading between USD0.91-0.92 at the beginning of the week.

Credit Suisse First Boston has set up a specialist marketing and sales team for major credit derivatives end users and boosted its structuring and trading capabilities. The group, dubbed flow credit derivatives coverage, is headed by Rob Lynn, managing director, according to market professionals. The firm has also hired Peter Nguyen, v.p. marketing to hedge funds and convertible arbitrage accounts at Merrill Lynch, to work in the new group. The firm set up the desk to cater to the growing demand from companies, such as hedge funds, insurance companies and banks' with large loan portfolios, who are regular users.

Covered call option writing by Japanese corporates has rocketed over the past few weeks, according to market officials. One trader said his firm is receiving around 30 requests per day, compared with 10 inquiries a month or two ago. Another estimated trades had increased by around 30%. "People are starting to believe that the economy has bottomed out," said Jim Clark, head of equity trading at UBS Warburg in Tokyo.

Bear Stearns recently moved Wee Siang Lee, associate director of credit derivatives in London, to the Tokyo desk in a similar role as part of the firm's buildup in credit derivatives in Japan. He reports to Ralph Orciuoli, head of credit trading in Tokyo. Lee said he will focus on structured transactions, such as trading baskets of credit-default swaps. "We're getting a lot of inquiries," he added.