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The cost of euro/dollar options headed lower last week, as the dollar appreciated against the common currency in the face of volatile global equity markets. One-month implied volatility fell to 11.5% late Wednesday in New York from 12.7% a week earlier. However, traders said a stronger dollar was probably only a function of fx traders locking in profits to offset losses elsewhere in their portfolios last week, and that the euro is likely to continue to appreciate. "The dollar was oversold, the euro was overbought and people are locking in some gains," said one trader, adding, "it's not people reversing positions, more just squaring out." As proof, he said a common trade remained was to buy short-dated euro calls/dollar puts with strikes at USD1.02 and higher. Euro/dollar spot was at USD1.02 early last week before coming back under parity to USD0.99 by late Wednesday in New York.

Safeway entered an interest-rate swap on the back of a recent GBP200 million (USD312.78 million) bond offering. In the swap the supermarket is paying approximately 76 basis points over LIBOR, and receiving the 5.875% coupon on the bond, said Miles Collins, director of corporate finance in London.

Goldman Sachs is setting its sights on the institutional market for a $350 million credit backing Verizon Wireless' $1.7 billion acquisition of Price Communications' cellular business. According to an official familiar with the deal, Verizon decided to come to market with an all-institutional facility because banks are generally terrified of the notion of adding telecom or wireless exposure to their portfolios right now. In addition, the Bedminster, N.J., cellular operator was looking for a deal that could be completed in a reasonable amount of time, so the deal is priced to move, he noted. Calls to Paul D'Auria, treasurer, were not returned by press time.

A live Web-cam of the Borgata, a resort and spa project from Boyd Gaming and MGM Mirage, can provide lenders to its new "B" term loan a bird's-eye view of the day-to-day progress of their investment. Maybe all lenders should be able to install live Web-cams to protect their investments. How about boardroom and executive office cameras?

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.

Bob Smith, portfolio manager at Sage Advisory Services, says he will shift 10% of the firm's portfolio, or $100 million, from bullet to callable agencies, as he anticipates interest rates will rise early next year. The move is a defensive play: when interest rates rise, negatively convex callable debentures will decline in price less quickly than their bullet counterparts, says Smith. In addition, because interest rates are at an all-time low, selling expensive bullets and buying cheap callables makes sense. Smith will initiate the move immediately to take advantage of this arbitrage.

A skittish market has put extra pressure on tower companies the past two weeks with bug-eyed investors nervously waiting for the six largest wireless companies to release their quarterly earnings and their future capital expenditure plans. "[Wireless] capex is revenue for the towers," one dealer explained. With a crimp expected in the revenues for tower companies, bids on paper for Crown Castle International, American Tower and SpectraSite Holdings have dropped three to six points. One dealer said he expects the paper to drop another three to five points before investors start stepping in for bargains.

Evergreen Investments is looking to add 5-10%, or up to $55 million, to its commercial mortgage-backed securities allocation. David Fowley, portfolio manager of $2.3 billion in taxable fixed-income, including the $550 million Evergreen limited duration fund, says he will look for securities with a two to three year duration that yield over 100 basis points more than 5-year Treasuries. Evergreen will sell two-year Treasuries to raise money for the purchase. Fowley sees the CMBS sector as a way to pick up decent yield without incurring the extreme credit risk associated with beaten up corporate names.

LightPoint Capital Management, a Chicago-based shop formed in April by five former ABN Amro leveraged finance bankers, is on the road raising equity for its first collateralized loan obligation. Tom Kramer, senior managing director and ceo, said he was talking to investors in Europe last week in an effort to raise the $20 million equity piece for the $400 million cash-flow arbitrage vehicle. He added that he has already spoken to a number of potential investors in the U.S., as well as some from Asia.

Fortis Investment Management, which manages E22 billion in fixed-income assets, will extend duration on its government bond portfolio once the yield on 10-year bunds hits 5%. As of last Tuesday, the 10-year bund was yielding 4.81%. Xavier Timmermans, Paris-based head of fixed-income funds, says Fortis has dramatically reduced duration versus its benchmark, the J.P. Morgan European Monetary Union All Maturities Index, in response to abnormally low yields. Fortis' fixed-income portfolio is at 75% of its benchmark duration, which is now 5.26-years.

Bankruptcy hasn't done much for the liquidity of WorldCom's bank debt, as no trades came in last week after the company and its domestic subsidiaries filed for bankruptcy last Sunday, according to market sources. One trader suggested that investors would begin to trade the bank debt once they had fully evaluated its expected recovery. The bank debt is currently being quoted at a three- to five-point premium to its bonds, which traded in the 12 1/2 to 14 context last week.