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Five-year credit-default protection on AOL Time Warner widened about 60 basis points in the wake of weak investor demand for its recent USD6 billion bond offering. Credit derivatives traders reported that New York-based AOL, the world's largest Internet and media company, was among the most heavily traded names last week as hedge funds and investment banks looked to buy protection on the bonds. Spreads on AOL widened to about 160bps last Wednesday from about 100bps on April 2 the day before the company's bond offering. "The bonds just haven't done that well. Spreads have widened on the bonds more than anyone thought they would," said one trader. "They've been really trading off and people are buying protection."

Alan Burnell, head of European government bonds at Deutsche Bank in Frankfurt, has joined Barclays Capital as a managing director and head of euro swaps and government bonds. He will report to Eric Bommensath, global head of fixed income.

It was Samuel Johnson who said "Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully." Trading losses may not be up there with being hanged in a fortnight, but they can certainly concentrate the mind.

Legal & General Group is planning to use interest-rate swaps to hedge upcoming five-year bond issues. Although the company has no immediate plans to issue five-year notes, it floats them on a frequent ongoing basis, said John Whorwood, treasurer in London. He said the insurer's issuance would depend on its mortgage-lending activity, but should total approximately GBP200 million (USD287 million) this year. The firm typically only enters swaps on its five-year bonds because these fund its mortgage-lending business.

Buyers were seeking high-strike caps and out-of-the-money cap/floor straddles last week because of a belief that volatility would increase in the front end of the curve. Traders said that the activity was likely driven by customer flow. Buyers are banking on increasing volatility in the short end because of the beginnings of an economic recovery coupled with uncertainty in the Middle East and the rise in oil prices.

Stanfield Capital Partners is preparing to launch a structured investment vehicle (SIV) that will be able to issue up to USD4 billion in term debt and use derivatives to manage interest-rate and foreign exchange risk, according to an investor who has seen preliminary marketing materials. Officials at Stanfield Capital in New York declined all comment.

Volkswagen has issued a PLZ100 million (USD24 million) bond and converted the proceeds into euros via an fx swap as a cheaper way of raising capital. In the swap, the company pays zlotys and receives euros, but Clement Denks, treasurer, declined to detail the exchange rates. He said VW entered the swap because it was offered an arbitrage opportunity via a reverse enquiry from Morgan Stanley. Morgan Stanley is also the counterparty to the swap and is one of VW's relationship banks.

Lombard Odier, which manages E1.5 billion in European corporate credit, is taking a step back from the market to gauge the expected flood of new issuance, after which it will begin to look at the primary market. Rodrigo Araya, corporate credit portfolio manager based in Amsterdam, says the market may come under pressure from large amounts of issuance and that he is waiting for spreads to widen out before getting back in to the market. He would like to see more issuance from the industrial sector to gain some diversifaction in his portfolio. "If [the issue] is interesting it's gone and your allocation is very low," he says of the current state of the primary market.

Some Loan Market Week surveys have been tougher than others to track down despite efforts by traders to persuade investors to turn them in. When a staffer tried to get one buysider to respond, he wasn't too enthused to vote for anyone, but on second thought he decided there could be some opportunity in it. He jokingly shared his strategy for selecting desks to fill the top spots. "I figure I should just auction off the slots--first place goes to the bank that buys me a round of golf, second for a day at a spa, and third for some great cigars," he quipped.

The Deal Roll-off Chart, provided by Dealogic Loanware, lists the 50 largest leveraged credit facilities in the U.S. market that are due to mature in the coming month. It is designed to provide a look at potentially available money in the market as credits are renewed or retired.

This chart, provided by Citibank/Salomon Smith Barney Inc., tracks bid-ask prices for par credit facilities that trade in the secondary market for the week of April 8. It also tracks facility amounts, ratings, pricing and maturities.

AMR Investment Services is looking to add up to $400 million in bonds of brokerage firms. It will sell U.S. government securities to finance the move. Bonnie Mitra, portfolio manager of $4 billion at the Dallas money management firm, says he wants to capture additional yield while guarding against the extreme volatility and credit risk that has plagued lower-rated corporate sectors, such as telecommunications. Mitra argues that brokerage firms are less susceptible to the kind of off-balance sheet accounting practices that have roiled the credit market in recent months because they mark their assets to market every day at the close of trading. The portfolio manager also says that brokerage firms, unlike banks, are not greatly affected by rising interest rates and a flattening Treasury yield curve.