Search results for

Analysts and traders are anticipating a widening in the European interest-rate swaps curve, particularly in the long end, because of the deteriorating credit quality of companies in the financial sector as well as a predicted reversal of the demand from investors to receive 10-year and 30-year fixed-rate positions. "[Given] the severity of the current crisis, swaps spreads are trading at very narrow spreads," said Peter Hartmann, director and euro swaps trader at Dresdner Kleinwort Wasserstein in Frankfurt.

Wellington-based asset manager BNZ Investment Management is considering using credit derivatives for the first time for its NZD120 million (USD58 million) domestic fixed-income portfolio. "We've been looking at this for some time," said Stephen Hong, manager of portfolio research and fixed-income. BNZ is looking at the possibility of investing in credit-linked notes as well as selling credit-default protection on domestic names as ways to increase yield on its portfolio. It will also consider investing in tranches of synthetic collateralized debt obligations, said Hong.

Daehan Investment Trust Securities is preparing to launch a domestic Korean fund that will use over-the-counter derivatives in the coming months. Ko Sukman, general manager for product development and services in Seoul, said the fund, with a target size of USD20 million, will look at trading over-the-counter and exchange-traded equity and bond options, along with interest-rate swaps. Ko also noted that it would consider trading credit derivatives but it will likely take 12 months or so as it would first have to educate investors about the products. The fund will likely use interest-rate swaps to hedge floating-rate bonds in anticipation of possible rate hikes in Korea.

Taipei-based Bank SinoPac is planning to purchase credit derivatives next year for its USD4.5 billion loan portfolio, a move that will make it among the first domestic banks to use the products in Taiwan, according to Henry Chang, head of fixed-income and derivatives. "Credit derivatives could act as a vehicle for hedging our loan exposure," said Chang.

The Deal Roll-off Chart, provided by Capital DATA Loanware, lists the 50 largest leveraged credit facilities in the U.S. market that are due to mature in the coming month. It is designed to provide a look at potentially available money in the market as credits are renewed or retired.

Scottish Widows Investment Partnership will put roughly 10% of its £3-4 billion actively managed fixed-income portfolio into subordinated bank debt once spreads between tier-one and lower tier-two bank debt hit 70 basis points over gilts. He declined to offer a prediction as to when this might occur. Gareth Quantrill, Edinburgh-based investment manager, says the investment manager had reduced its allocation to subordinated bank debt about a month ago because valuations looked too stretched. Spreads have moved quite dramatically--from 50 to 60 basis points over gilts--since.

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.

Bill Gahagan, portfolio manager at American Century Investments, says he will rotate 5% of the firm's portfolio, or $65 million, from asset-backed securities to corporates. Equity prices need to stabilize and clearer signs of an economic recovery must be visible before adding corporates, he says, declining to specify any particular trigger. But, he notes that the move is unlikely to occur within the next three or four months, because the market needs to wash itself from the wave of corporate accounting scandals, first.

Fort Washington Investment Advisors is looking to increase its mortgage-backed securities allocation on the view that the recent pain in the asset class is due to end. Tim Policinski, portfolio manager of $1.6 billion in taxable fixed-income, says low interest rates and reduced prepayment risk have created a window of opportunity. Fort Washington will raise the MBS allocation to 36% of the $42.5 million Touchstone core bond fund by purchasing 30-year 6.5% notes and 15-year 5.5% notes. To raise assets for the purchases, the fund will sell largely five-year Treasuries. Policinski says the strategy for the fund is broadly representative of that for the remainder of the assets he manages.

Riverwood International could be forced to shelve its planned bank deal as the initial public offering that is part of the package is in danger of being struck down by the volatile equity markets. Riverwood's new senior debt deal is contingent on the IPO, said spokesman Steve Meyers. J.P. Morgan and Deutsche Bank were reportedly preparing to launch the $250 million term loan for Atlanta-based Riverwood sometime this month, but bankers and investors believe the deal might not go ahead due to the equity market.

Bankers evaluating Steve Wynn's $2.4 billion development of high-end Las Vegas hotel and casino Le Reve are reaching the conclusion that the disadvantages of being away from the hub of the resort are more than compensated for by having the only golf course on the strip. The casino, which is believed to be grander in vision than the famed Venetian, has not yet broken ground. But some bankers already are looking forward to testing out the golf theory. Hmmm, the casino or the golf course. Life's tough as a gaming lender.