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In a move to re-establish its weather derivatives trading business Swiss Re Financial Products has hired Mark Tawney, former head of the weather derivatives desk at Enron in Houston, and a team of four other weather traders from the bankrupt power company, according to a Swiss Re official.

The ballooning spread between implied volatility and historical vol on some convertible issues could presage a meltdown in the convertible bond market or break the back of a number of convertible arb hedge funds, according to two European fund managers. Paul Besson, fund manager of the EUR220 million convertible arb fund at CCR Gestion in Paris, attributes the widening vol spread to the sharp rise in the number of convertible arb funds. These funds, he said, have bid up convertible prices to vertiginous levels. "It's like walking on thin ice," he said.

UBS Warburg has started pitching its fourth USD1 billion synthetic collateralized debt obligation dubbed SALS, according to a market official. The firm's last SALS deal hit the market at the end of last year. The static CDO is referenced to a USD1 billion pool of 100 investment-grade bonds diversified among industries, including autos, chemicals, utilities and telecom companies. The deal, which has a five-year maturity, is scheduled to be rated in New York within the next two weeks and will come to market in the next couple of months.

TD Securities has hired Hardy Hodges, head of the equity derivatives group at Wells Fargo in San Francisco, as a director in its credit derivatives structuring group in New York, according to Phil Chiaramonte, managing director of U.S. credit derivatives structuring in New York. "He is a top-notch structurer," Chiaramonte said. Bringing Hodges on board to fill the new position is part of the firm's plan to expand its credit derivatives group in the U.S. (DW, 11/25).

Costco Wholesale has entered an interest-rate swap following its recent USD300 million five-year bond offering to bring its floating-rate debt closer to its target of 40%. Before implementing the swap, Costco had approximately 78% in fixed-rate debt and 22% in floating-rate; after the swap, its floating-rate debt totals 36%. Hal Kaplan, treasurer, added that a portion of the proceeds of the bond offering will be kept in short-term investments--earning a floating rate of interest--and the swap will act as a hedge for that portfolio.

Nelson Capital Management will invest in Treasury Inflation Protected Securities (TIPS), lower rated investment-grade corporates and step-up agency bonds, on the view that the economy is rebounding and inflation will increase, says Melissa Parker, portfolio manager. The trade is set to begin this week and the overall asset allocation will remain unchanged as all purchases will be financed by sales of assets, she adds.

There wasn't much baseball played at Fenway Park last week a sloppy home opener and two innings washed out by rain --but there was plenty of gamesmanship. A Fleet Bank sign in left center field had blocked out a Citizens Bank sign behind it on a building across the street from the park. But Citizens replaced its sign with a giant replica of Fenway's fabled Green Monster. The sign, complete with green padding and blasted-ball dents, has the distance from home plate in one upper corner and the Citizens Bank name in the other. The Fleet sign still blocks out much of the Citizens sign, but now it's just covering green and the rival bank's name is still easily spotted. Now if only Sox fans could spot Pedro's fastball ....

Fifth/Third Investment Advisors, is looking to add up to $360 million in higher quality corporate, mortgage pass-through and asset-backed bonds. It will sell Treasuries and agencies to fund the moves. Mitch Stapley, who oversees the money manager's $3 billion taxable fixed-income portfolio, says he is still not convinced that companies with lower credit ratings will be able to benefit from what may be an "earnings-challenged" recovery. Among corporate names, Fifth/Third is particularly eager to see further issuance from GE Capital. It bought a piece of last month's record-breaking issue, the 6.75% notes of '32, bringing its overall holdings in the name to roughly $45 million. Stapley says he would add up to $30 million more in the five- to 10-year range if GE continues to issue bonds to pay down commercial paper exposure, as is widely expected. That issue came at 109 basis points over Treasuries and had widened to 153 basis points over the curve as of last Monday. Stapley says he believes the company is fundamentally sound, and that spreads will recover from recent investor jitters over its reliance on commercial paper.

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.

London-based Rothschild Asset Management, which manages E3 billion in European fixed-income assets, is rotating out of swaps-related credits into cyclically sensitive names further down the credit spectrum. Adrian Grey, director, says swaps-related names, for example agencies, have tightened as far as possible and now the firm is looking to buy new issuance. Most recently, the firm bought Hilton Group's 6.5% of '09, a new issue, and sold a variety of maturities of German mortgage-backed securities, or Pfandebreifes. Grey says he will look at new issuance from investment-grade industrials when they become available.

The launch of fallen-angel Calpine's $600 million "B" term-loan was postponed from last Thursday to possibly a week from now and potential investors are saying the lead banks on the deal should take that time to increase pricing from LIBOR plus 23/ 4%. A lack of familiarity with the name and a downgrade last week from Moody's Investors Service are two issues putting pressure on the coupon, bankers and investors said. "The banks are having trouble getting Calpine done at current pricing, given this week's downgrade to Ba3 [by Moody's Investors Service]. New pricing is likely to be as high as LIBOR plus 33/ 4% with a discount," one hopeful investor said.