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Pioneer Investments, which manages EUR9 billion in European credit and government bonds, will add France Telecom and Deutsche Telekom step-up coupon bonds when the recent volatility in these securities decreases. On the back of recent uncertainty over potential downgrades, asset disposal programs and debt refinancing, these companies' bonds have widened 10-30 basis points, depending on name and maturity, says Raffaele Bertoni, portfolio manager. "It's difficult to predict the limit of the widening; it depends on the further news on asset disposals--for example, how France Telecom will finance Mobilcom debt," he adds. Once a clearer picture emerges, the firm will pick up shorter-dated step-up coupon bonds, he says. FT's 6.75% step-up of '08 was trading 155 basis points over swaps last Tuesday, while DT's 5.75% step-up of '06 was trading at about 115 over.

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.

SunAmerica Asset Management will buy $30-70 million in Ginnie Mae 8% bonds in an effort to pick up yield without taking on additional credit risk. It will sell Ginnie 6% notes. Michael Cheah, portfolio manager of $2 billion in taxable fixed-income, says he will look to make the trade within three months, by which time he believes the market will have stabilized. Until that time, he expects 10-year U.S. Treasury yields to trade within a range of 4.65-5.20%. Although many portfolio managers have been adding corporates or moving down in credit-quality on the expectation that the economy will improve, Cheah says he is worried that the possibility of additional Enron-style accounting difficulties makes corporates too risky a bet. He believes the economy is in worse shape than the real fourth quarter GDP growth of 0.2% suggests, since nominal GDP contracted by 0.1%. Among mortgage-backed securities, Cheah favors Ginnies because they have an explicit government guarantee. He also notes that at a spread of 135 basis points over Treasuries, they trade wide of double-A corporates, which were at 128 basis points over Treasuries last Monday.

Eddie Tam, director of equity derivatives sales at Credit Lyonnais in Hong Kong, resigned last Tuesday for what he attributed to personal reasons. "I'm looking for a new challenge." Tam, a seven-year veteran of Lyonnais who previously worked at Merrill Lynch in New York and Hong Kong, said he plans to time off from the industry and do some traveling.

Goldman Sachs has hired H.C. Liu, Asian head of equity derivatives (ex-Japan) at Dresdner Kleinwort Wasserstein in Hong Kong, in a new position as director of equity derivatives sales in Hong Kong, according to David Voon, managing director and head of equity derivatives in Hong Kong. Voon declined further comment and Liu, who started two weeks ago, declined comment.

Italian construction company Astaldi is planning to enter an interest-rate swap to convert the euro proceeds from a recent fixed-rate bond offering into a floating-rate liability. Giorgio Bianchini, head of finance in Rome, said the company is likely to convert a portion of the EUR150 million (USD132 million) deal, which was priced earlier this month, into floating. He said the company will leave between a third and half of the EUR150 million issue in fixed-rate.

Daido Life Investment Trust Management, with over JPY300 billion (USD2.3 billion) under management, is considering purchasing credit-default protection for its JPY1 billion (USD7.5 million) domestic convertible bond portfolio, once it receives the okay from regulators. A fund manager at Daido in Tokyo said that as the convertible bond portfolio is part of a public fund, it is currently prohibited in Japan to use credit derivatives. However, the fund manager mentioned that this is currently being discussed internally, and he believes that within six months it will approach The Investment Trust Association, Japan, a self-regulating body for investment trusts, to get approval and possibly buy credit-default protection within 12 months.

The International Swaps and Derivatives Association is petitioning the Czech Republic and Slovakia to allow close-out netting. Peter Warner, assistant director of European policy at ISDA in London, said it had meetings in the two countries last week and expects both countries to pass legislation by year-end.

JPMorgan has started marketing a synthetic collateralized debt obligation referenced to a USD1 billion portfolio of investment-grade bonds. The CDO, dubbed AMBER, has an actively managed reference pool, according to potential investors who have seen the preliminary proposals for the deal. It could not be determined who will manage the deal. Officials at JPMorgan declined comment.

KBC Financial Products started lobbying the Stock Exchange of Hong Kong last week about listing capital guaranteed notes--structured with over-the-counter derivatives--on the exchange, according to Sajeev Sirpal, managing director and head of Asia in Hong Kong. A typical capital guaranteed note will consist of a combination of a zero-coupon bond and a structured over-the-counter call funded by the interest on the note.

Market makers bought approximately one yard of USD0.8650 one-week euro puts/dollar calls Jan. 25 and Jan. 28, which sent implied volatility rocketing to 11% from 9.5%. Spot was trading around USD0.8630 when the options went through, according to traders.