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The price of one-month euro/dollar options drifted down to 9.4% last Wednesday having traded at 9.6% the previous week while the greenback weakened to USD1.07 in the spot market, from USD1.05. The decline in vol counters traditional market movements, which see vols spike as the euro appreciates, noted a New York-based trader. One reason for the recent fall in vol lies in the slow pace of movements in the spot market. The presence of several large exotic options, which hold big stop losses at levels such as USD1.07 and USD1.08, has also served to stem any volatility increase, he added.

Britannia Building Society has entered a foreign exchange swap to convert a portion of a recent EUR250 million (USD266.375 million) floating-rate offering into a sterling-denominated liability. Jeremy Helme, capital markets manager at Britannia in Leek, U.K., would not reveal the notional size of the swap. He said the purpose of the swap was to achieve a better funding rate. He would not disclose the exchange rate on the transaction.

Bill Armstrong, portfolio manager at Principal Global Investors in Des Moines, Iowa, will swap $504 million, or 7% of the firm's portfolio, from Treasuries and agencies into corporates. He will reduce exposure to Treasuries and agencies by 4% and 3%, respectively. The move will be triggered by a military showdown with Iraq, he says, as the initial reaction to this geopolitical event will be a flight to quality, causing both Treasury and agency bond prices to rally and leading the 10-year Treasury yield to drop to 3.75%. Last Monday, the 10-year Treasury yielded 4%.

Oakland Raiders offensive coordinator Marc Trestman was getting a lot of press in the run up to the Super Bowl, but he was already a familiar name to loyal readers of this space. Back in 1995, Bank Letter interviewed Trestman, a former investment banker who had just taken a job with the San Francisco 49ers, and tried to bait him into saying nasty things about commercial bankers in the Aug. 21 Loose Change. That was back in the day when investment banks were raiding commercial banks to start loan groups. Trestman, however, couldn't be pulled offside.

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.

The Texas Permanent School Fund is looking to shift some $170 million out of collateralized mortgage obligations and commercial mortgage-backed securities and into corporates and callable agency debentures. Carlos Veintemillas, portfolio manager of $8.5 billion in taxable fixed-income, says CMOs and CMBS have had a great run, but he believes the economy will improve by year-end, which should cause corporates to outperform CMOs and CMBS. He also argues that corporates will get a boost if dividend taxes are eliminated, because it will encourage companies to look more favorably on issuing equity and cut back on debt issuance. As for callable agencies, Veintemillas says they offer more yield than bulleted agencies, and tend to outperform bullets as interest rates rise. Veintemillas says he will make the trades as the securities he is looking for become available.

London-based F&C Management will be an ongoing buyer of higher rated asset-backed securities and is looking at opportunities in the financial sector. Peter Harvey, head of U.K. credit who oversees £25 million in sterling corporate bonds, says he likes ABS because the asset class offers a good premium in comparison to other corporate bonds. In particular, he likes hospital securitizations, for example last year's BUPA transaction and utility deals such as those from Anglian Water and Glas Cymru. He declined to say which upcoming transactions he may be buying, but any bonds he buys will be in the 10-year and over part of the curve.

The market for WorldCom's bank debt slipped a few points falling from the 25-26 range into the 23 context last week. Traders said paper for the bankrupt telecom company fell after AT&T posted weakening revenues for both its fourth quarter and year-end results. Rumors were floating of a seller with $200 million of WorldCom bank debt, but no trades could be confirmed. "Banks are sellers at the 26 level," commented one trader. AT&T reported an 8.6% decline in revenue for its fourth quarter compared to the same period last year. Full year revenue was also down with a decline of 10.4 % from the previous year. Other market players suggested the name fell on reports that David Matlin of MatlinPatterson Global Opportunities Fund is confronting hurdles in his effort to gain control of WorldCom's bankruptcy process. WorldCom's recently appointed acting cfo, Victoria Harker, could not be reached by press time.

Workflow Management has secured a new $180 million credit with softer covenants and relatively lower rates in order to remain in compliance with its credit agreement during a downturn in the printing industry. The new line replaces a $180 million revolver on which Workflow had breached EBITDA-based covenants last April, said Michael Schmickle, executive v.p., cfo and secretary. He explained that the previous cap on leverage was 3.75 times, while Workflow's multiples are presently more than four times. The company obtained waivers on the covenants, but pricing climbed to LIBOR plus 12% levels with the covenant breach. The new agreement provides more relaxed covenants, including a senior debt leverage provision shifting from 4.9 times down to 3.9 times by the end of 2003.

Royal Bank of Scotland closed syndication of its $116 million financing package for MW Manufacturers and filled the institutional piece for its PlayPower acquisition credit with co-lead UBS Warburg. The MW deal, which was twice oversubscribed, backs private investment firm Investcorp's $188 million acquisition of the door and window product maker from Fenway Partners, according to a banker familiar with the situation. The credit includes a five-year, $20 million revolver; a $66 million, six-year term loan priced at LIBOR plus 41/ 2% and a $30 million mezzanine piece that matures beyond six years. RBS is sole lead and underwriter of the credit, the banker stated, adding that seven investors signed onto the deal. MW's senior leverage levels are at 2.25 times, while its total leverage is at 3.25 times, he added. An RBS official declined to comment, while officials from MW and Fenway did not return calls by press time.