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Credit protection on Sonera, Finland's largest telecom operator, tightened by roughly 20 basis points last week after news that the government has approved the telecom company's EUR1 billion (USD881 million) rights issue. The issue will improve the company's fiscal position. Five-year protection on Sonera tightened to roughly 250bps Wednesday as part of a trend that has seen its credit-default levels come in from over 1000bps in September. "They've continued to make good asset sales, they've managed to refinance and now they are doing a rights issue," said one trader in London, adding the bullish feeling has spread to other European telecom names with British Telecommunications and France Telecom also tightening by a similar amount. "Sonera has really driven sentiment on the telecom side," a trader added.

Swiss Re is preparing a USD150-400 million catastrophe bond deal that it will issue early next year, according to officials familiar with the deal. The proceeds would be used to provide coverage against an earthquake in California. Calls to Swiss Re were not returned.

UBS Warburg is looking at structuring a capital guaranteed product comprising of credit derivatives to sell to retail investors in the U.K. Although the plan is in its infancy and details are scarce, officials at the firm said it hopes to use single-name default swaps to leverage a fixed-income portfolio and generate higher returns than are currently possible in the equity or bond markets. Warburg officials said such a product has not been sold before to U.K. retail investors, who are historically more conservative then their counterparts on the continent. Pros at rival firms were not aware of any similar products.

Zurich Scudder Investments, which manages £14 billion in European fixed-income assets, plans to sell off its positions in Swedish government bonds once the five-year spreads versus bunds tightens to about 40 basis points. Last week, the five-year spread versus bunds was about 60 basis points. Zurich Scudder has built up its position in Swedish government debt over the past few months. Sandra Holdsworth, London-based portfolio manager, says the firm has bought the '06 and '08 bonds recently because the currency has stabilized, the curve has not discounted potential interest-rate cuts and inflation is dropping. The firm sold Eurozone government bonds to fund the purchase. Roughly 82% of Zurich Scudder's £30 million Threadneedle European Bond fund is devoted to govvies, 13% of which is Swedish paper.

Advantus Capital Management is seeking to shorten duration by some 5% to prepare for an anticipated higher-interest-rate environment in 2002. Wayne Schmidt, a portfolio manager who oversees $1.65 billion in taxable fixed-income, says the St. Paul, Minn. firm will probably sell $25 million in 10-year U.S. agency debentures, and buy a combination of three- to four-year corporates and 30-year Treasuries before year-end. Schmidt says he is waiting for indications from the Federal Reserve that it has finished cutting interest rates before making the move. He would also like to see stability, if not improvement, in unemployment and consumer confidence data.

Marty Margolis, portfolio manager with Public Financial Management, says his firm will swap 20%, or $500 million, of its $2.5 billion portfolio, out of agency debentures into Treasuries over the next six weeks, should agency spreads remain at current levels. As an example, Margolis says both Fannie Mae and Freddie Mac two-year bonds have seen their spreads over comparable Treasury move from 45 basis points last July to 22 basis points, as of last Tuesday. Margolis adds that if the same spreads narrow by an additional 15 basis points, putting agency spreads at their tightest levels since Spring 1997, the firm will add 20%, or $500 million of its $2.5 billion portfolio, at the same time.

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.

Credit Suisse First Boston is once again the far and away leader in terms of volume of high-yield issues managed since 1998 that subsequently defaulted, according to BondWeek's third annual Turkey Tables. Morgan Stanley and Goldman Sachs moved up considerably, due mostly to the tremendous number of defaults this year.

Credit Suisse First Boston is once again the far and away leader in terms of volume of high-yield issues managed since 1998 that subsequently defaulted, according to BondWeek's third annual Turkey Tables. Morgan Stanley and Goldman Sachs moved up considerably, due mostly to the tremendous number of defaults this year.

The calendar picked up again, with about $20 billion in dollar issuance hitting the investment grade, high yield and emerging markets. The highlight of the week was the AT&T jumbo deal, which was the second largest U.S. corporate bond on record. AT&T doubled the deal size to $10 billion in the face of strong demand from U.S. investors reaching for yield given the gap down in Treasury yields since the suspension of the 30-year auctions. The 10- and 30-year tranches were each $2.75 billion in size and reportedly had books behind them of over $10 billion each. The 30-year bond, which priced at +295 bp to Treasuries tightened about 20 bp on the break. The 10-year tightened about 15 bp. Overall, the market seems in very strong technical position with significant pools of cash to be put to work in both Europe and the United States. The decline in the 'war' premium given the successes this week in Afghanistan has also underpinned spreads.