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Many institutional market participants enter into derivatives transactions through multiple affiliates. By designating these affiliates as "Specified Entities" for the purposes of Section 5(a)(v)--"Default under Specified Transaction"--of the 1992 International Swaps and Derivatives Association master agreement, a party is able both to book trades in the most advantageous location and to have maximum flexibility in the event its counterparty defaults.

"The argument went full circle and we are now back to the 1999 definitions."--Kimberly Summe, general counsel of the International Swaps and Derivatives Association in New York, commenting on proposed changes to credit derivatives documentation. For complete story, click here.

Five-year credit protection on U.S.-based cable and media firms rallied last week with default swaps on names such as Comcast Corp. and Cox Communications thinning. Five-year default swaps on Comcast saw the largest move, sidling to 265 basis points last Wednesday, having stood as wide as 325bps the week before, according to a New York-based trader.

Commerzbank Securities is restructuring its equity derivatives group from a region-specific focus to a sector-specific focus to manage risk in the same way as its brokerage, research and credit areas. Eduardo Bastida, global head of equity derivatives trading in London, said the move is spurred by a shift in market perception that has affected single-stock correlation with sector movement in the equity market. Bastida said it is too early to comment on how reporting lines would change because of the shift.

Structured Finance Advisors, a specialist asset-backed securities manager with approximately USD3.5 billion under management, is preparing its fourth collateralized debt obligation and is considering making the new issue synthetic, having previously issued cash deals.

Deutsche Bank Securities has issued a USD9 billion static collateralized debt obligation in the U.S. The deal, dubbed Rhombus, references a pool of asset-backed securities, according to Brian Wiele, managing director and head of the ABS syndicate in New York. The firm then executed credit-default swaps on the majority of the portfolio to transfer the risk to investors.

Chris Neuharth, portfolio manager at U.S. Bank Corp. Asset Management, says he is considering moving $80 million, or 2% of the firm's portfolio, from Treasuries into corporates. He reasons that corporate bonds should perform well over the next year, after the economy fully recovers. There is no particular trigger for this move besides the assumption that the macroeconomic environment has stabilized and that the risk of a double dip recession is reduced, says Neuharth. However, should the stock market enter a new phase of high volatility and sharp price declines, the firm would postpone the move, he cautions.

Deutsche Bank and Wells Fargo Bank have fattened pricing and added tranches to their $265 million credit for Veritas DGC. The company, a close cousin to the energy sector, could not disguise its bloodline and met with resistance from investors. "The 'B' guys wanted the changes," said a banker familiar with the deal. "The market didn't like the way it was structured." He noted the lead arrangers had to answer concerns about the credit's collateral with a new structure. A Deutsche Bank official declined to comment, while a Wells Fargo official could not be reached by press time. "I don't think the changes were that radical," said Matthew Fitzgerald, cfo of Veritas. He explained that some of the banks wanted a subordinated piece, while some investors wanted a higher yield. "It was to provide additional flexibility for every type of investor," he added.

So we've heard of the curse of the mummy's tomb and even the Sports Illustrated curse but could there be a stadium-naming curse? This week, when Conseco filed for bankruptcy not only did it join the ranks of over-leveraged defaulted companies, but it also became one of the bankrupt companies with a stadium bearing its name. The Conseco Fieldhouse, home of the Indiana Pacers, joins a list that includes the Tennessee Titans' Adelphia Coliseum, the Houston Astros' Enron Field, and the Washington Wizards' MCI Centre.

National City Investment Management is looking to add some 5%, or $250 million, in corporate bond exposure throughout its various portfolios. Cindy Cole, senior portfolio manager of $5 billion in taxable fixed-income, sees corporates benefiting from what she believes will be a slow recovery, driving the 10-year to 5% or higher by the end of 2003. The firm will sell U.S. government securities to raise money for the purchases. Cole says National City will look for a period of weakness in the first quarter, as concerns about war or the overall health of the economy may return, to add further exposure.

Principal Global Advisors is adding to its already overweight allocation in mortgage-and asset-backed securities on the view that the economic recovery will be slow, says portfolio manager Marty Schafer. Schafer, who oversees $7 billion in assets, says purchases for the portfolio's core overweight in MBS pass-throughs and ABS will be made primarily on "short-term sell-offs." His affection for MBS is predicated upon what he says is the sector's low volatility, high-liquidity and excellent carry. Moreover, he adds that "the GSE's are continuing to grow and banks are continuing to add to their retained portfolio's--there isn't a coupon that isn't well-bid or a [dollar] roll that isn't at fail." In respect to ABS, Schafer says he will continue to buy triple-A "major issuer" credit card and auto-receivable paper "on every dip." He declined to name specific issuers, noting, "I'll buy them all, since my only real risk is in short-term price swings."