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ARAMARK Corp. a service provider that generates about USD8.5 billion in annual revenue by offering services including cafeteria food and school uniforms, is considering entering an interest rate swap to lower the fixed-rate proportion of its debt portfolio. The company may enter a swap to convert a USD300 million bond it sold this summer into a floating-rate liability, said John Benjamin, assistant treasurer in Philadelphia. He said ARAMARK has not entered a swap because rates have moved against it since the six-year deal was priced in August. "We're still thinking about it," he said. The company has used interest rate swaps before.

Risks in long-dated foreign exchange derivatives are driven by three factors: spot and the yield curves of the home and foreign currency. These products are in general quite complex and difficult to manage. This article uses typical power reverse dual currency (PRDC) swaps to illustrate the embedded FX optionality and the associated risks.

Lehman Brothers is bringing aboard Catherine Loh, a fixed income sales professional at Goldman Sachs in Singapore, as the general manager of its Singapore branch. Kirk Sweeney, head of Asia ex-Japan fixed income sales in Hong Kong, said Loh is a replacement for Tom Picard, who relocated to New York to take a role in the structured credit trading group. Loh will oversee fixed income and derivative sales and report directly to Sweeney.

Nucor Corp., a steel producer with some USD4 billion in annual revenue, is considering entering its first interest rate swap. Jim Frias, corporate controller in Charlotte, N.C., said he is contemplating entering a swap to take on a floating-rate liability and lower the ratio of fixed-rate debt on its balance sheet. Of the company's almost USD900 million in total debt, 67% is in fixed-rate obligations. "We have a big ratio of fixed right now and we think long-term variable rates will be a bit lower-cost," he said, declining to provide a target ratio.

The International Commercial Bank of China, headquartered in Taiwan, is looking to market credit-linked notes for the first time. The over-the-counter derivatives will be structured by international firms on behalf of the bank. "We're always looking to offer our clients new products," said Angela Chen, manager of the treasury department in Taipei. She continued that given the current low interest rate environment, ICBC is looking to offer credit-linked notes that offer an enhanced return. Chen predicted it would execute its first trade within six months, adding that it has to educate its customer base first.

John Lewis, a U.K.-based retailer, has entered an interest rate swap to convert a GPB100 million (USD155.54 million) bond offering into a synthetic floating-rate liability. Peter Ford, treasurer in London, said the company chose to enter the swap to rebalance its ratio of floating-to-fixed rate debt. The retailer targets a 50/50 mix and its floating rate portion had fallen below 50%. Ford declined to elaborate. This is the first time John Lewis has converted an entire bond deal into floating-rate debt, but that is just a reflection of the amount the company needed to convert to rebalance its fixed-to-floating ratio, Ford explained.

"It is no good implementing piecemeal bits of the jigsaw. There is a significant number of changes for us to feel it's important [to look at this area]."--Tim Hailes, senior equities lawyer at JPMorgan, on the examination of its risk trading systems to avoid potential mismatches by pending changes in the International Swaps and Derivatives Association's 2002 equity derivatives definitions. For complete story, click here.

The cost of U.S. dollar/Japanese yen options inched higher last week and the greenback gained on the yen, as investors speculated that the Bank of Japan's intended reforms will lead to a medium-term weakening of the yen. One-month implied volatility rose to 10.7% Wednesday in New York, up from 10.2% earlier in the week. The move was in line with a stronger dollar. The pair traded at JPY123.20 by Wednesday, up from JPY122 Monday.

Deutsche Asset Management, which manages E16 billion in fixed-income assets from its Zurich office, is biding its time until swap spreads on government bonds and pfandbriefe widen before adding to its covered bond positions. Sven Rump, portfolio manager, says swap spreads are tight because of supply and demand, making government bonds relatively cheap versus covered bonds. Governments will be issuing more bonds in the coming months, and for the time being there is no premium to be paid on government bonds. Once spreads widen, he plans to move between 10-15% of the portfolio, or at least E1.6 billion, into covered bonds. Currently, the spread between 10-year government paper and pfandbriefe is 26 basis points. Rump says he will buy when spreads are 50 basis points.

In a bid to pick up yield, Brandywine Asset Management is moving 7% of its assets, or $175 million, into select corporate credits that have been hit hard by recent negative headlines. Stephen Smith, executive v.p. and portfolio manager overseeing $2.5 billion in taxable fixed-income, says firm is looking at credits trading at a significant discount relative to their historical prices and to where they would trade in a normal economic environment. Names the firm is looking at include Household International, CIT Group, Verizon Communications and Electronic Data Systems. The firm is selling 30-year French and Italian sovereign debt and using paydowns from inverse floating-rate mortgage-backed securities to finance the purchases. Smith says he expects the move to be completed within the next week or two, as Brandywine is already in the market looking for bonds.

The latest round of gallows humor features an email saying that JPMorgan is cutting 120% of its workforce. The gag email, making the rounds in the market, says that after the bank lays off all of its staff, it will cut an additional 20% through external reductions cutting staffers at rival banks. Firms picked by JPM as "External Reduction Targets," or ERTs, include Goldman Sachs, UBS Warburg, Citigroup and Credit Suisse First Boston.