Search results for

Standard Chartered is talking with four possible counterparties about entering an interest-rate swap with a maturity of up to seven years. "It's in the pipeline," according to Madhav Shankar, manager of derivative products in Mumbai. He added that corporates in India are looking for longer-term swaps to hedge outstanding balance sheet liabilities. Shankar believes the market for five to seven-year interest-rate swaps will develop rapidly, within the next few months. He declined to name the potential counterparties.

The Commodity Futures Modernization Act of 2000 authorizes trading, on a delayed basis, stock futures, meaning single-stock and narrow-based stock index futures, and options on such futures. As a result, the tax laws were also amended to make sure that stock futures would not get a tax advantage over equity products currently traded in both the over-the-counter and exchange-traded markets. With the CFMA changes to the tax laws, the tax treatment of stock futures is made similar to the current tax treatment of OTC and exchange-traded options on single stocks and narrow-based stock indices.

A unit of San Francisco-based Pegasus Aviation Inc. plans to enter an interest-rate swap on the back of an upcoming USD1.127 billion bond issue backed by aircraft leases. In the securitization, the leases are sold to a special purpose vehicle, PALS Holding Co. III, which in turn issues the bonds, said Chandra Gopinathan, associate analyst at Moody's Investors Service in New York. Moody's is rating the deal. Ratings on the tranches are expected to range from Ba2 to Aa2.

Credit protection on U.K. rail operator Stagecoach is expected to fall in price after the company reportedly won a new franchise to run trains in the U.K. A London-based trader said before the rumor began circulating, bond investors and banks with loan positions had been snapping up protection, largely because the company issued a profit warning earlier this month. The franchise, which would allow Stagecoach to run trains in the southwest region of England for 20 years, would give the company a guaranteed source of income. The trader estimates this could push pricing on five-year credit default swaps on Stagecoach to the mid 300 basis points range from 410bps as soon as the information is confirmed.

Axia Energy Europe, the entity formed by the merger ofKoch Energy Trading and Entergy Trading and Marketing, plans to set up a weather derivatives desk in London within the next quarter. John Polasek, head of structured products and origination for weather products in Houston, said the company is setting up a London-based desk to increase its presence in Europe. Axia has more time to look at new markets now that the merger between the Koch and Entergy trading operations is complete, he added.

Wells Fargo Bank is looking to hire one to two equity derivatives marketers/structurers over the next year in San Francisco. The three-strong trading, marketing and structuring team is beefing up to meet customer demand, said Hardy Hodges, head of equity derivatives in San Francisco. The group works with the bank's corporate client base, which consists of smaller and mid-sized corporates in the Western half of the U.S. Although it provides the full gamut of products, it tends to work mainly with hedging and monetization transactions, such as collars and variable pre-paid forwards, said Hodges.

Allmerica Asset Management is looking at buying MBS and select corporate credits, especially in the telecom sector, because declining interest rates and improved market conditions will lead to spread tightening, according to portfolio manager Ann Tripp. Tripp says the Worcester, Mass.-based fund just sold $5 million of 8.55% Abitibi notes of '10 (Baa3/BBB), in the paper sector, to take advantage of the attractive spreads in the telecom sector. One issue that she argues is compellingly valued is the recently issued 10-year 7.40% France Telecom notes of '11 (A1/A-), where she rotated into a $5 million position.

In addition to the sentiment effect from the equity selloff, the corporate bond market is also focused on the building calendar. Although the blockbuster deals are out of the way, absolute yields are low (even if spreads have widened) and corporate Treasurers may look to access the market before increased volatility or another down leg in prices restricts the primary market to only the largest benchmark borrowers. Whether corporates can withstand a more vigorous new issue calendar is not clear. On the positive side, investment grade debt continues to benefit from flows into fixed income and also from the reversal of the high yield convergence trade that dominated the first six weeks of 2001. Issuance continued at an anemic level for the week with only $8 billion in debt brought to market. Average credit quality at BBB remained low and average deal size was under $500 million for the second week in a row.

Voyager Asset Management will continue to reallocate assets to the spread sector, especially corporates, on the view that the drop in interest rates will add more fuel to the rally in the single-A and above corporate bond sectors, says portfolio manager Greg Poplett. Poplett, who heads a team running $7 billion, recently purchased a 10-year Bank of America deal, the 7.40% notes of '11 (Aa2/A), a trade he financed by selling 10-year Treasuries.

Principal Capital Management is considering bringing its MBS allocation up to an index-weighting of 35%, from its current underweight of 28%, a move that would add up to $320 million. Portfolio manager Lisa Stange, part of a team that manages a $4 billion "core-plus" portfolio, says a decision will be made when the April prepayment figures are released. She argues that once the figures are out in the latter part of May, a majority of eligible homeowners will have refinanced their mortgages, thus normalizing prepayment speeds. With the refi wave cresting, this will improve the technical situation in the current coupon sectors. She declines to speculate on what paper she would buy to bring her allocation up to a market weighting.

Shurgard Europe, a Belgian self storage operator, increased its E140 million ($129 million) credit facility to E215 million ($198 million) as market conditions prevented the company from obtaining the E250 million ($230 million) facility it had originally discussed with bankers. Patrick Metdepenninghen, cfo, said the company will go back to the market this April to raise the remaining portion it was seeking with hope that conditions in the European loan market will improve by that time. "We didn't get as much as we wanted, but we will be back in April to look for another $78 million," said Metdepenninghen. He declined to discuss banks he has contacted. The credit was launched at the end of September, but syndication did not close on the facility until the end of February.