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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.

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.

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.

Debbie Cervantes, portfolio manager at Patterson & Associates, says her firm will add agency notes and Treasuries to its portfolio, using $85 million in cash or 10% of the total fund to finance the purchases. The move will be made as soon as the stock market and the economy recover. Two likely indications that the economy is recovering, she says, would be a stabilization of the unemployment rate and some market anticipation that the Federal Reserve will shift to a tightening bias. She declined to predict when she sees the market evolving in that direction. She says that the firm has kept the overall portfolio duration short, at six months. Because, with rates at an all-time low, there is more yield pickup on the shorter-end of the curve and no real incentive to give up liquidity. As an example, six-month commercial paper, which last Monday yielded 1.80%, offers 25 basis points additional spread over Treasuries than comparable agency notes. This is due partly to the fact that the yield curve is inverted, which diminishes the incentive of extending duration, she notes. She reasons that once the Fed tightens, the yield curve will take a positive slope, making the purchase of one- to two-year agency notes and Treasuries more affordable.

Market players are eyeingHuntsman Corp.'s recently amended and restated bank loan, waiting to see if an assigned rating will unleash trading in the new credit or if heavy leverage will hold it back. The $1.6 billion credit comes in conjunction with a larger restructuring plan, and some traders said they expect the debt's value, previously in the low 80s, to jump once the new deal is rated. "Par loan guys would look at the deal if it had a rating," said one dealer. But the credit has traded in the 85 range since the restructuring, and it may be hampered by its highly leveraged position and a current tough market for chemical names, one trader said.