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"Inflation is one of the key benchmarks for funds and insurance companies...The market is limitless."--Tony Main, v.p. in the global credit derivatives group at Merrill Lynch in London, predicting the market for structured credit products linked to inflation could be huge. For complete story, click here.

A U.K. law firm has drafted a standard document for credit portfolio swaps in a move that could revolutionize the synthetic structured credit products market. A standard document could reduce drafting risk, save money on legal fees and speed up the time it takes to draft and rate the transactions, according to Chris Georgiou, partner at Ashurst Morris Crisp, the law firm that drafted the document, in London. Officials at CDO giants Morgan Stanley and JPMorgan said they would welcome a template that standardized the basic elements, such as the cash settlement procedure, of structured products.

TD Securities has hired Andrea Fabbri, director and deputy head of credit derivatives at IntesaBci in Milan, and Bob Champney, director in specialist derivatives sales and trading at Merrill Lynch in London, for its derivatives sales group. Fabbri joins with responsibility for marketing structured credit products, including cash and synthetic CDOs, to Southern Europe, while Champney joins the structured equity group with a particular focus on marketing products to U.K. fund managers.

Tokyo-Mitsubishi Asset Management is looking at using credit derivatives for its JPY500 billion fixed income portfolio for the first time. Takayuki Amano, head of fixed income in Tokyo, said the fund intends to study credit derivatives in greater detail as an alternative product to plain-vanilla bonds, but noted it will likely take over 12 months before it pulls the trigger on any contracts. "We don't have much of an idea of the products yet," said Amano. Since credit derivatives are marked-to-market it would be difficult for the fund to trade the instruments until it has a firmer understanding of the product and how to evaluate them, he explained declining to elaborate. Amano declined to comment on potential counterparties.

Great Universal Stores has entered a cross-currency interest rate swap on a EUR600 million (USD645 million) tranche of a recent bond offering to convert it to a floating-rate sterling denominated liability. The London-based retail conglomerate also entered an interest rate swap on the GBP300 million (USD483 million) tranche of the issue to convert it to a floating-rate liability. Albert Hollema, group treasurer in Amersfoort, the Netherlands, said the company needed to convert both tranches into floating liabilities to maintain its optimal fixed-to-floating ratio of 50/50. The cross-currency swap was used to keep its liabilities in sterling, which it uses for operations.

Wheaton Capital Management will likely invest in equity options within its soon to be launched Wheaton Healthcare Partners hedge fund, a long/short equity fund specializing in the healthcare sector. Jerry Treppel, general partner at the fund in Edison, N.J., said the fund will buy and sell puts and covered calls where it sees potential to make investment gains. While the fund will initially be focused on healthcare companies, its investment universe will expand to include other healthcare related firms, including healthcare service companies, as the fund grows, he said.

Wachovia Securities has hired three traders and sales professionals to kick-start a listed options/exchange traded fund (ETF) business in the U.S., and is hunting an additional three sales staffers for the operation. Todd Steinberg, managing director and head of equity linked products in New York, said the products will be structured with over-the-counter options and settled through the exchange.

The snow in the Northeast certainly wreaked havoc last week, causing meetings to be cancelled and many bankers to stay home. But the freak weather was not all bad with some loan market players "stranded" whilst on holiday in places such as Vermont and Florida.

Napoleon Rodgers, portfolio manager at Alpha Capital Management, says he wants to rotate 7%, or $14 million of the firm's $200 million portfolio, from mortgage-backed securities into high-quality corporates rated single-A or higher. The rationale is to bring corporate exposure, which is currently 22%, to just above the Lehman Brothers benchmark level of 28-29%. Rodgers wants to pick up additional yield but will selectively add higher-rated names as he fears that geopolitical developments will lead to a corporate sell-off with spreads "blowing out" for speculative paper. He will buy corporates in the three- to 10-year maturity range, and his buying target for single-A rated corporate bonds, which last week traded at 200-250 basis points over Treasuries, is 25 to 40 basis points wider.

Scottish Widows Investment Partnership is keeping a large cash position in its U.K. bond fund, because it is cautious about the bond market on the whole. David Millar, head of government bonds at the Edinburgh-based manager, says that although he is seeing a slow and gradual economic recovery, he is aware of the geopolitical risks out there, which is making the firm cautious about expressing a strong opinion. The £125 million U.K. bond fund holds government and corporate bonds and uses the Barclays Capital sterling all-stocks index as its 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.

Cavanaugh Capital Management will buy some $50 million in mortgage-backed securities. Jim Dugan, portfolio manager of $700 million in taxable fixed-income, says that with interest rates a bit higher than their lows, and perhaps climbing as geopolitical risk subsides, he sees prepayment risks diminishing. Cavanuagh will buy shorter-maturity securities that have lower extension risk than conventional 30-year pass throughs. These include 15-year Ginnie Mae midgets, balloon mortgages with a final maturity of five- to seven-years and certain Planned Amortization Class (PAC) bonds that are structured to limit extension risk. Dugan says Cavanaugh is in the market now making the purchases, and hopes to have the program complete within three weeks.