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Crédit Agricole Indosuez opened the European ABS market this year with a rare synthetic collateralised debt obligation offering investors the chance to gain exposure to a portfolio of triple-A rated European ABS. The SPV, Triplas Synthetic CDO SA, issued just Eu35m of funded notes, referenced to an initial portfolio of 19 asset backed securities, with a nominal value of Eu600m. Crédit Agricole Indosuez will manage the senior risk.

BNP Paribas has resumed marketing Vela Lease Srl, a Eu1.2bn securitisation of lease receivables for Locafit, a subsidiary of Banca Nazionale del Lavoro. Banca Nazionale del Lavoro is joint lead manager. The Eu571m 'A1' tranche, rated triple-A by Moody's and Standard & Poor's, is expected to come in the 30bp-32bp area for a 2.1 year average life and expected maturity in March 2006, while the second triple-A tranche, also worth Eu571m, will come in the 42bp-45bp range. The tranche has an expected average life of 4.5 years and is expected to mature in December 2009.

Microcell's bank debt surged on the announcement that the company has committed to a restructuring plan. A $3 million piece of the bank debt changed hands in the 61 1/2 context after climbing up out of the 50s last week. About two months ago, the bank debt levels began to rise from the 20s as lenders anticipated a restructuring that would be favorable to bank debt holders.

Euro/dollar risk reversals moved in favor of euro calls/dollar puts as the dollar began to strengthen against the euro last Thursday due to better-than-expected numbers from the Institute for Supply Management in the U.S. The 25-delta risk reversal moved to 1.1% from 1.4% in favor of euro calls earlier in the week. And at the same time, implied volatility in the currency pair fell to 10% from 10.3%, because traders predicted the dollar's fall was coming to an end. "Now the directional bias has evened out," he added. The greenback appreciated against the euro to USD1.0371 on Thursday from USD1.05 before the New Year holiday.

SAC Capital Management, a long/short equity hedge fund with approximatel USD4 billion under management, has hired Neil Chriss, co-founder and president of brokerage firm ICor in New York, to increase the hedge fund's assets dedicated to quantitative strategies capabilities. SAC plans to increase its use of quantitative strategies, such as statistical arbitrage, by both growing its assets under management and boosting the relative importance of the strategies in its group, according to Chad Loweth, managing director and head of business development in Stamford, Conn. Quantitative strategies could jump to 20%, from 5% of the firm's assets under management, added Loweth.

"We don't want to be in the business of swapping earthquake risk for credit risk."--Wayne Cramer, v.p. of global risk management and insurance at Vivendi Universal in New York, explaining why it opted to issue a catastrophe bond rather than take out reinsurance. For complete story, click here.

Five-year credit-default swap spreads on Fiat widened last week to 1,200 basis points from 1,100bps, in a delayed reaction to Moody's Investors Service's downgrade of the credit to junk. Traders said that in a quiet holiday-shortened week, Fiat was the only credit that saw a movement.

The International Swaps and Derivatives Association published a new Master Agreement in December to replace the 1992 agreement. The new agreement represents the work of ISDA's Documentation Committee, with over 100 different members reviewing earlier drafts and providing comments. The trade association has already arranged for netting opinions on the new agreement in 36 different jurisdictions.

Falling interest rates will push firms to be more creative in structuring capital guaranteed products this year because the premium typically used to purchase options has shrunk substantially. Firms started working on innovative structures last year, but are expecting demand to pick up. "I don't think there's a day that goes by that we don't think about how to make options cheaper," said Stéphane Liot, global head of fund derivatives at BNP Paribas in Paris.

Asset managers are expected to step into the synthetic collateralized debt obligation market to manage deals this year as a way to increase assets under management and fees. This trend took off last year when several asset management giants including Pacific Investment Management Co. (PIMCO) (DW, 6/29), Barclays Global Investors (DW, 5/19) and the Trust Company of the West (DW, 2/10) managed their first synthetic offerings. Many others, including State Street Global Advisors (DW, 5/13), started considering the move.

San Diego-based hedge fund manager Context Capital Management plans to enter its first equity options as part of the investment strategy for its USD30 million Context Convertible Arbitrage Fund. Jim Abbott, fund manager, said the fund, which was launched in August, will employ equity derivatives to hedge credit risk on convertible bonds. It may also enter trades where it arbitrages the price of a company's debt versus its equity.