Search results for

ING Investment Management Asia Pacific (Hong Kong) , with USD32 billion under management, is considering expanding its fixed-income portfolio to include purchasing and selling credit-default swaps for the first time next year.

Hartford Investment Management, a money manager with USD171 billion in assets, is working with Morgan Stanley as its exclusive counterparty as it prepares to pull the trigger on its first credit derivative. An official at the money manager in Hartford, Conn., said it chose Morgan Stanley because it had offered the best advise throughout the process. The money manager spoke to all the major players, including Lehman Brothers, Merrill Lynch, Deutsche Bank and Goldman Sachs, the official added.

Government-owned Korea Development Bank is planning to become the first domestic bank to offer structured credit products as well as trade credit-default swaps to take advantage of the growing hunger for credit risk in Korea. H.G. Chung, head of financial engineering in Seoul, said the bank is looking to tap the growing interest in the products in Korea, as well as reduce credit risk on KDB's balance sheet through offering synthetic CDOs. Chung continued that the bank will target insurance companies as well as pension funds. The size of the initial synthetic CDO will likely be at least USD100 million.

Morgan Stanley has created an index of 35 corporate bonds to allow investors to both take on and shed corporate credit risk through investing in the index or entering total return swaps, according to Steven Zamsky, managing director and credit strategist in New York. The firm plans to begin trading calls and puts on the index, dubbed TRACERS, by early next year. "There is a lot of two-way demand and an incredible amount of trading volume," according to Zamsky. Since the inception of the index, a month ago, more than USD4 billion has been traded on the index.

Roulette wheels have been adding value to casino owners in Monte Carlo for hundreds of years, but more recently the mathematical technique named after that city--also used in quantum physics and atomic bomb research--has found a valuable application in finance. This Learning Curve looks at one simple application of Monte Carlo analysis to calculate the risk that LIBOR will exceed a set level in a given period of time. This allows the risk of a floating-rate investment to be quantified and helps to answer questions such as:

Schroder Salomon Smith Barney is looking to add one or two credit derivatives traders in London to meet increasing deal flow. Iftikhar Ali, head of the four-person default swap trading desk in London, said he plans to build the team because he expects this year's unprecedented growth and volatility in the credit derivatives market to continue next year as more end users and banks enter the market. He also predicts a healthy pipeline in the European cash bond market in the first quarter, which will lead to greater demand for protection.

Credit-default protection widened 400 basis points on Gap after speculation that the largest U.S. clothing chain was at risk of violating its loan covenants. Credit derivatives traders reported that the clothing company was among the most heavily traded last week despite overall low volume in the run up to Christmas.

Trading on the U.S. dollar/Argentina peso forward market came to a near halt last week as market players backed away in the wake of the country's ensuing political and economic chaos and waited to see if the currency peg to the U.S. dollar breaks. By Friday the market had already adjusted for the pending break by pricing the one-month forward between ARS1.40-2. "Nothing is happening in the market now. It's so illiquid. There is no interest to buy or sell. The market is nonexistent," said Hank Lynch, v.p. of foreign exchange options at FleetBoston.

UBS Warburg has agreed to join Morgan Stanley and J.P. Morgan in standardizing credit-default swap agreements between the major counterparties, according to Mike Pohly, head of credit derivatives at Morgan Stanley in New York. Officials at UBS did not return calls.

HBOS Group, the U.K. retail banking giant formed by the merger of Halifax and Bank of Scotland, is considering making the jump to becoming a credit market maker from an end user, with USD20 billion in credit investments. Officials from the two fractions in London said the new entity is contemplating starting a credit trading desk under the HBOS banner that may boost its credit portfolio by USD5 billion. The firm currently invests in cash and synthetic products, including synthetic collateralized debt obligations and mortgage-backed securities.

Brendan White, a portfolio manager with Cincinnati-based Fort Washington Investment Advisors, is going to shift 5%, or $55 million, of the firm's high-yield assets from double-B and above bonds into single-B's. The move is based on the view that both the high-yield market and the economy are set to rebound in the next six to 12 months. White says he has not started the reallocation yet, although the move is imminent, and that there are no specific triggers other than a close look at economic output figures, consumer confidence numbers or a rally in the stock market, all signs he is confident are improving.

Cavanaugh Capital Management (CCM) will begin buying corporate bonds for its portfolios for the first time since 1994, in an effort to pick up additional yield. Megan Brune, portfolio manager at the Baltimore-based firm, says CCM will seek to allocate up to 5% of money currently under management to corporates, selling Treasuries in accounts with high Treasury exposure. CCM may also allocate up to 10% of incoming money to corporate bonds. Brune says CCM expects $40-145 million in new money over the next three months.