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Commercial banks and investment banks are squaring off amid the Financial Accounting Standards Board decision to reassess a ruling that loan commitments aren't considered derivatives. FASB is now reassessing the ruling as a result of pressure from investment banks, including Goldman Sachs, which went on the offensive in April to convince the board that the definition of a derivative should apply to credit arrangements. FASB insiders said Goldman laid out "persuasive arguments" as to why more loan commitments meet the definition of a derivative. They are aware of the problem banks may have with any change, but would be looking strictly at the technical aspects of the issue.

Fremont Investment Advisors, a San Francisco money management fund, has raised some $8.5 million in cash which it plans to invest in euro-denominated corporate debt and 30-year TIPS. Sandie Kinchen, portfolio manager of about $125 million, says she is waiting for the euro to stabilize before she invests. She says there is no particular level that would trigger a move, merely that it would have to stop declining in value. Companies she likes include Deutsche Bahn Finance, which she notes is a stable, old-economy credit. The moves will come out of the firm's $85 million global fund, which, at a 5.34 duration, is short the 5.87 year J.P. Morgan Government Bond Index.

Does the bank debt market lead to the good life? Depends on who you ask. One market veteran remembers his early years: "I'd get home from work at 9 every night, pass my wife in the hall and we'd say to each other, 'Why are we doing this?'" The answer was to get their dream home, which they now have and say was worth the toil. Still, life on a trading desk can come at a price. Some dealers are fueled on the promise of early retirement, but acknowledge the risk element of their job and say it's taxing on the mind and body. "At 25, I was still fully human," one 30-something trader recently quipped. "Now I get up in the morning and it sounds like Rice Krispies."

Northern Capital Trust has drastically shortened its duration toward its benchmark, the Lehman Brothers Government corporate index, and will remain short as long as the spread between Treasuries and underlying inflation remains compressed, says Greg Sweeney, portfolio manager with the Fargo, N.D.-based investment management firm. Meanwhile, Northern Capital is buying corporate bonds 20% shorter than the benchmark.

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.

Confident that the Federal Reserve easing policy has set the foundation for an economic recovery, Wells Capital Management will increase its MBS allocation by $100 million through the sales of some treasury bonds. In addition, and for the same amount, the firm will be moving down the credit spectrum on its corporate allocation in order to capture more yield, says Paul Single, portfolio manager with the San Francisco-based asset management firm.

BNP Paribas has hired a pair of credit derivatives professionals from Societe Generale in Tokyo. Vincent Boyer, credit derivatives trader, and Go Yajima, a credit structurer, will report to Stefane Delacote, head of credit derivatives in BNP's Tokyo office. Delacote said he plans to make additional hires. "We want to build up the team; covering high-grade, high-yield and exotic Japanese credits." He added that demand in Japan is growing from both portfolio managers looking to hedge their books as well as from local investors hungry for credit risk. Boyer and Yajima could not be reached for comment.

Credit derivatives traders turned their attention to Railtrack last week as shares in the U.K. rail network manager plummeted. The credit default swap spread for five-year protection blew out to 65 basis points/75 basis Wednesday from 45bps/55bps Monday. Anjan Malik, v.p. structured credit trading at Lehman Brothers in London, said "The market does not believe Railtrack can default, it is too strategic an asset." He added, "If this was in the U.S. it would be trading at 300bps or 400bps."

Deutsche Bank has boosted its credit derivatives effort with hires in trading and structuring. Aelisa Kim Cipriani, director in the CDO team at Morgan Stanley in London, started Monday as a director in collateralized debt obligation structuring, according to Jeffrey D'Suza, head of European collateralized debt obligation business in London. This is a new position, he said, adding the department is growing in response to increased demand for structured products. Deutsche Bank also transferred Michael Furtado, a lawyer in the firm's legal department, to the CDO team. Furtado said he will focus on the execution and structuring of CDOs.