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Investor, a Swedish industrial holding company with approximately SEK130 billion (USD13 billion) in assets, has entered a foreign exchange swap to convert the proceeds from a EUR500 million (USD435 million) bond it sold late last month into Swedish krona. A treasury official at the company in Stockholm said it converted the deal into its local currency because it maintains all of its debt in the Swedish currency, but chose to issue in euros because it wanted to extend its maturity curve and would not be able to raise that much long-term money in the Swedish market.

The growth of the credit derivatives market has created new relative value opportunities for credit investors. One such opportunity is trading the default swap basis in which investors may take a relative value view on the spread between a bond issued by some entity, and the spread demanded by a default swap contract linked to that same entity. While there is a theoretical relationship between these two spreads, there are a number of factors that may cause this relationship to break down which have been described in a previous Learning Curve (DW, 12/17). In certain cases this can present clear investment opportunities to investors.

Westpac Banking Corp. is planning to issue its first synthetic collateralized debt obligation in Asia. The CDO will likely be referenced to a USD1 billion pool of Australian, New Zealand, European and Asian credits, said Nick Fyffe, global head of structured product sales in Sydney.

ABN AMRO has launched a series of structured notes in Australia, which are thought to be the first of their kind in the Aussie market, noted Aaron Stambulich, equity derivatives sales and trading in Sydney. "With reverse convertibles, there's always a guaranteed coupon. To enhance the yield, we've taken out the downside protection," said Stambulich.

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Royal London Asset Management will add the new commercial real estate mortgage-backed issue from Annington--a securitization of former military housing--to its £2 billion corporate bond portfolio. Eric Holt, portfolio manager, says he likes CMBS, because they are triple-A rated and backed by a physical asset. He also recently bought the latest Canary Wharf deal, which was priced at 70 basis points over gilts and had a coupon of 53Ž4%. He expects the Annington deal to come to market at about 100 basis points over gilts with a coupon of about 6% when it hits the market. The firm deployed new cash to fund the purchases. In general, the firm is underweight ABS at 7% versus its benchmark the Barclays Capital Over Five Year Sterling Non-gilt index.

A few loyal readers last week chimed in on several topics and tweaks that could be covered or added to this venerable section of LMW. With spring nearing, golf scores could add an interesting twist, traders noted. Also of interest could be an in-depth look at the deal toys (everything from footballs to bobbleheads) that banks score from companies when closing deals. And for a personal touch, there could be personals: snippets on the lonely hearted in the loan market seeking someone who, like them, likes pina coladas and getting caught in the rain. Could be more interesting than the latest bank robbery in Guam.

Wayne Schmidt, portfolio manager with Advantus Capital Management, is going to swap $70 million, or 7% of the firm's portfolio, out of Treasuries into corporates, on the view that corporate spreads will tighten as the economy rebounds. He says there is no particular trigger for such a move, and selection will be made on a credit-by-credit basis. However, he notes that the recent strength in the equity market is an indicator of a potential rebound.

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.

Swiss Re Investors, the New York investment arm of the giant Swiss insurer, is looking to add 2-3%, or $640-960 million, in crossover credits to its portfolio on the view that the economy will come back strong this year and productivity and consumer earnings will pick up. Andre Moutenot, the chief portfolio manager who oversees the firm's $32 billion in taxable fixed-income, says management restrictions prevent him from moving further down the credit ladder into true junk territory, or he would do so to pick up additional yield. He says the firm was making the trade last week, and he would not specify names of companies at which the firm is looking.