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UBS Warburg has created a capital guaranteed note on the DAX and Euro Stoxx 50 that offers more upside potential than traditional structured products and is being aimed at investors who are turning bullish on equity markets. The one-year certificates will offer higher participation than most guaranteed notes, but in turn also have the potential for a 100% wipeout, said Martin Boldt-Christmas, equity derivatives analyst in London.

Taylor Woodrow, a FTSE 250 housing and construction developer, is considering entering its first interest-rate swap to convert part of a GBP250 million (USD356 million) 6.78% 10-year bond into a synthetic floater. Adrian Auer, group finance director in London, said the company is reviewing some interest-rate structures to determine whether it makes sense to hedge the rate risk on the offering. The deal was priced last month. "We will probably use interest-rate derivatives to get the balance right," he said. The company may enter a swap now because this bond offering was its first in more than a decade.

One-month implied volatility for Japanese yen/dollar options rose only slightly to 10.5% Wednesday, up from about 9.8% a week earlier, as demand for at-the-money yen calls/dollar puts, saw a slight increase. The one-month 25-delta risk reversal inched further in favor of yen calls/dollar puts. Traders reported that activity in the options markets was slow last week because investors were wary of the volatile spot market. "Spot has been whipping around all week. It's very choppy. Most investors are staying out," said one trader. Spot was trading at JPY133.65 last Wednesday.

Taplin, Canida & Habacht will swap out of short-term Treasuries into corporates on the view that the Enron-related worries have caused corporate spreads to widen more than justified, and that Treasury prices are going to decline with the improved economy. Bill Canida, portfolio manager with the Miami-based shop, says he will wait for 30-year auto sector corporate bonds, such as Ford Motor Corp., to reach a 300 basis points spread over Treasuries before moving. As of last Monday, those spreads ranged between 270 and 280 basis points. He declined to specify exactly how much he would move.

Betting, and losing... again. In the wake of revelations that an Allied Irish Bank subsidiary was dealing with a $750 million fraud in its foreign exchange department, The Sun reports that rogue trader Nick Leeson, who brought down the historic Barings Bank through fraudulent futures contracts, was heard to have bet someone recently it could never happen again. Hopefully, this time he was betting with his own money.

The Deal Roll-off Chart, provided by Dealogic, 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.

Pioneer Investments, which manages EUR9 billion in European credit and government bonds, will add France Telecom and Deutsche Telekom step-up coupon bonds when the recent volatility in these securities decreases. On the back of recent uncertainty over potential downgrades, asset disposal programs and debt refinancing, these companies' bonds have widened 10-30 basis points, depending on name and maturity, says Raffaele Bertoni, portfolio manager. "It's difficult to predict the limit of the widening; it depends on the further news on asset disposals--for example, how France Telecom will finance Mobilcom debt," he adds. Once a clearer picture emerges, the firm will pick up shorter-dated step-up coupon bonds, he says. FT's 6.75% step-up of '08 was trading 155 basis points over swaps last Tuesday, while DT's 5.75% step-up of '06 was trading at about 115 over.

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.

SunAmerica Asset Management will buy $30-70 million in Ginnie Mae 8% bonds in an effort to pick up yield without taking on additional credit risk. It will sell Ginnie 6% notes. Michael Cheah, portfolio manager of $2 billion in taxable fixed-income, says he will look to make the trade within three months, by which time he believes the market will have stabilized. Until that time, he expects 10-year U.S. Treasury yields to trade within a range of 4.65-5.20%. Although many portfolio managers have been adding corporates or moving down in credit-quality on the expectation that the economy will improve, Cheah says he is worried that the possibility of additional Enron-style accounting difficulties makes corporates too risky a bet. He believes the economy is in worse shape than the real fourth quarter GDP growth of 0.2% suggests, since nominal GDP contracted by 0.1%. Among mortgage-backed securities, Cheah favors Ginnies because they have an explicit government guarantee. He also notes that at a spread of 135 basis points over Treasuries, they trade wide of double-A corporates, which were at 128 basis points over Treasuries last Monday.

Sequa, a diversified manufacturing and technology company, has cancelled its $75 million revolver ahead of the October 2002 maturity and is now seeking a new facility. The J.P. Morgan-led credit was terminated because Sequa did not expect to be in compliance with certain financial covenants of the revolver, said Linda Kyriakou, spokeswoman for Sequa. Kyriakou declined to comment on the level of borrowings on the revolver at time of cancellation.

The Government of Singapore Investment Corporation (GIC), as part of its efforts to grow its global fixed-income team, is looking to hire an experienced corporate bond trader for its London office, according to an official familiar with the plans. The new hire will work with senior portfolio managers as well as credit and market analysts to develop analytical tools and give analysis on the primary and secondary fixed-income markets. GIC, which manages $100 billion, has offices in New York, Tokyo, Hong Kong, Beijing and San Francisco. Calls to Walter Schabel, head of the London office, were not returned.