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HSBC plans to structure the first local currency interest rate options in the Philippines in the next two months and JPMorgan is not far behind, according to officials. "It's part of the natural evolution of the market," said Dalmacio Martin, head of derivatives trading in Makati City. He continued that the bank will look to market caps, floors, and swaptions to clients as hedging tools as well as embedding the options in structured notes. "Yield-enhancing structures are good as rates are low here," Martin added. "It's in the pipeline," said an official at JPMorgan, adding, the firm will likely start offering the options by year-end. He declined to elaborate.

The state treasury of Bundesland Sachsen-Anhalt, a state in eastern Germany, plans to hire a professional for its medium-term note and commercial paper program because of its active use of derivatives to manage interest rate costs. The new hire will work alongside Michael Freiherr von Eyss, who is responsible for the two programs, and one of the two individuals will focus specifically on derivatives, said Axel Gühl, head of treasury at the Ministerium der Finanzen des Landes Sachsen-Anhalt. He explained that this hire is indicative of how important the derivatives market has become in managing the state's interest costs. "Managing our MTN program has become far too much for one person," he pointed out. The new hire will report to Gühl.

UBS Warburg plans to set up a credit derivatives desk in the Lion City and has hired Anders Haagen, v.p. in the credit derivatives trading and structuring group at ABN AMRO in Singapore, to spearhead the effort. The firm already has a bond desk and a derivatives desk would be a natural extension, according to market officials. Haagen confirmed his appointment but referred further queries to Lee Knight, managing director of the fixed income division at UBS in Tokyo. Knight declined comment.

Bristol & West, a U.K. bank owned by the Bank of Ireland, plans to purchase call options on four stock indices to structure two global guaranteed equity funds. Mark Mears, group product manager in Bristol, U.K., said the firm will choose a counterparty to provide the options after the investment period on the products closes today. Until that time, investors receive 4% interest.

First comes love, then comes marriage, then comes a banker in the baby carriage...While the loan market has had a slim new issue calendar over the past nine months or so, it seems that loan market players have been busy working on a couple of new issues of their own. At least three wee ones have been born to syndicators and traders over the past three weeks. Names have been withheld to protect the sleepless.

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.

Insight Investment, which manages £8 billion in predominately sterling-denominated corporate bonds, is looking for signs the S&P 500 has started to rebound and can maintain its gains before adding riskier credits to its portfolio. David Cryer, fund manager, says some market-watchers indicate a level of 660 for the S&P as the point where the markets should begin an upward trend. However, with the S&P at 825 last Monday, he says it is important to start putting on positions beforehand.

Jim Dugan, portfolio manager at Cavanaugh Capital Management, is looking to rotate 12% of the firm's portfolio, or $78 million, out of corporates and into mortgage-backed securities. The move will be triggered once the 10-year Treasury yield backs up to 4%; the bond was yielding 3.67% last Tuesday. Dugan wants to see some of the pressure on prepayment risk diminish before purchasing MBS, which he says is likely to occur given the steep drop in Interest rates.

Merrill Lynch has launched 17 high-yield indices in the U.S. and Europe that cap the weighting of any single issuer at 3%. Malhar Korde, London-based assistant v.p. in the firm's portfolio strategy group, says a number of large high-yield money managers began using the capped indices as benchmarks almost immediately after they went live. Although the standard unconstrained indices will continue to operate, Korde believes the capped indices will quickly become the standard. "Given the shift we've seen already, it's clear the trend will be toward people using constrained indices," he says.

A new $210 million add-on term loan for Terex being led by Salomon Smith Barney and Credit Suisse First Boston has raised the ire of investors as the new paper is priced more generously than existing debt, sending levels for the old paper down to the mid- to high 90s. That twist has some existing investors looking for an exit and others asking for the old paper to be repriced to the same level as the new issue.

NIB Capital Bank is in the early stages of marketing the equity portion of a leveraged loan collateralized debt obligation. The size of the transaction has not been finalized and will depend on the appetite for the asset class, says Jeroen van Hessen, head of structured finance in The Hague. The loans are currently on NIB Capital's balance sheet and van Hessen says the bank is looking at all of its assets with a view to securitize them. The bank is aiming to complete another transaction by year-end. In future, NIB Capital will look to team up with asset managers to do collateralized debt obligations, but it wants to establish a track record first.

Several fixed-income portfolio managers say they are slowly building their corporate bond positions. And, some of them say a U.S. invasion of Iraq will serve as a catalyst for their strategy. "We're in the process of forming a bottom. If you're underweight corporates or don't have corporates, this is a really good time to begin adding," says John Burger, portfolio manager at Merrill Lynch Investment Managers (MLIM). He cautions, however, that he expects extreme volatility over the next two months or so.