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Exelon has decided to exit weather derivatives, emissions, coal and congestion trading after designating these markets illiquid, according to market officials who have spoken to the company. As a result of the decision it has let go several staff, including Peter Frantz, head of weather derivatives in Kennett Square, Pa. Calls to Frantz were referred to Ben Armstrong, a company spokesman, who said Exelon Generation continues to actively trade the commodity markets. He was unable to comment on Frantz or the four markets the company is exiting. Frantz could not be reached.

Dresdner Kleinwort Wasserstein plans to start selling structured hedge fund notes through syndicates of firms to increase the size of transactions. "This will take the fund derivatives market to a new level," said Mehraj Mattoo, managing director and global head of alternative investments in London. He predicted that a syndicated note could be around EUR200 million (USD195 million), which is four times the size of a typical private placement.

Fitch Ratings plans to move its Italian structured finance team to Milan on Jan. 1. Patrizia Lando, senior director and head of the Italian structured finance team in London, said it is moving the team because of the increasing importance of the Italian market. "There needs to be someone there to explain the deals to investors and be close to the clients," said Lando. The move follows the increasing independence of Italian structuring desks, explained Lando, adding that previously Italian firms would work with a London based investment bank to structure the deal and that the investment bank would chose the rating agency. But, now most of the decisions come straight from Milan.

Axiom Investment Management, a Hong Kong-based asset manager with USD70 million under management, is considering investing in equity-linked notes for its USD7 million emerging markets hedge fund in the coming months, according to Jess Au, analyst in Hong Kong. The fund has used equity-linked notes and over-the-counter options in the past but focuses primarily on long/short equity plays, noted Au. She continued that if the Hong Kong market turns around in the coming months, it will consider investing in bullish equity-linked notes to capture upside gains on single-stock domestic names. Au declined to elaborate on specific products.

Hedge funds have tripled their share of the credit derivatives market in the last two years, according to a draft of the British Bankers' Association's 2002 survey of the credit derivatives market, a copy of which was obtained by DW. In addition, banks, which made up nearly two-thirds of the market at the end of 1999, now only account for half and are predicted to total a mere 47% in 2004. The survey was conducted in London, but looked at firms' global portfolios. Officials at BBA declined comment.

HSBC has issued a USD1 billion synthetic CDO referenced to a portfolio of investment-grade corporate credits. Rick Ziwot, managing director and head of structured credit products at HSBC in New York, said the CDO, dubbed the Tranched Investment Grade Enhanced Return Securities or TIGERS transaction, was split into six tranches.

JPMorgan has reorganized the flow products desk within its risk transformation group to give it a global focus. Stephen Stonberg, managing director and head of European credit derivatives marketing in London, and Andrew Palmer, managing director and head of U.S. credit derivatives marketing in New York, will each continue to run the risk transformation groups regionally, but Stonberg will be responsible for funded flow products globally and Palmer will be responsible for unfunded flow products globally, Stonberg said.

Hypovereinsbank, which manages approximately E6 billion in government bonds and pfandbriefes, will add new government bonds on the view that increased issuance of two- to five-year bonds will lead to a flattening of the yield curve. Christian Schablitzki, head of HVB's bond trading unit, says governments affected by recent floods will have to raise cash on the debt markets.

Tastes Great, Less Filling ... Food euphemisms abound in the loan market, where deals are "sweetened" and investors are often characterized as hungry and even "licking their chops." Indeed, investors scarfed down food deals not so long ago. But one banker, lamenting the efforts expended in trying to sell new deals to a picky buyside audience, sounded more like a weary waiter. "It's like feeding someone with a full stomach," he said. Maybe just a thin mint, sir?

Mellon Bank auctioned off roughly $100 million of Adelphia Communications subsidiary bank debt last Thursday, as the workout process drags on. The Pittsburgh-based bank sold roughly $15 million of the cable company's Frontier Vision facility in the 86 range, $60 million of its Century-TCI facility around 85, and $25 million of the Century Cable revolver in the 68-69 context. It could not be determined whether the sales covered all of Mellon's Adelphia exposure. Mellon Bank officials declined to comment and a spokesperson did not return calls by press time. Christopher Dunstan, Adelphia treasurer and cfo, could not be reached by press time and a spokesperson did not return calls.

Chandler Asset Management will look to extend the duration of its portfolio by swapping one- to two-year agency debentures and buying three- to four-year debentures. Marty Cassell, portfolio manager overseeing $1.3 billion, estimates the trade would involve about $40 million in assets and raise the firm's duration from 2.12 years to 2.2 years. He believes rates have gone too low on expectations of another rate cut by the Federal Reserve, which he sees as unlikely. Cassell was looking for two-year Treasury yields to return to 1.90% before pulling the trigger on the trade. Last Monday, yields had backed up to 2.04% from that level.