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Five-year credit default swap spreads on Ford Motor Credit and General Motors Acceptance Corp. widened 20-25 basis points on the back of GMAC's USD6 billion global notes offering last week and growing uneasiness over both auto makers being put on negative credit watch in mid-August by Fitch and Standard and Poor's. A New-York based trader reported that credit default swap spreads on GMAC had widened to about 93bps Thursday from about 64bps two weeks ago.

Edgar Senior, a structurer and marketer in the synthetic portfolio credit department at Goldman Sachs in London, is moving to the investment bank's New York office to take a similar position. Senior said he is making the move because the market for high-yield synthetic CDOs is much larger in the U.S. than in Europe as the underlying assets are more liquid. Senior declined further comment.

Merrill Lynch is conducting a feasibility study into structuring the first synthetic collateralized debt obligation referenced to shipping loans. The firm is looking at structuring the deal on behalf of a third party bank, which has a USD1 billion portfolio of shipping loans and wants to remove credit risk from its balance sheet, according to an official familiar with the deal. Bankers at Merrill declined comment.

Bulent Osman, head of the U.S. dollar interest-rate options desk at J.P. Morgan in New York, has been made redundant. An official familiar with the departure said Osman was let go as part of the firm's efforts to cut costs. Osman could not be reached for comment. Sara Strang, head of Bermudan options in New York, has been promoted to fill Osman's position. She confirmed her appointment and said the two positions have been merged, but declined to comment further.

Bharat Petroleum Corp. plans to start using crude oil derivatives and ramp up the number of interest-rate swaps it enters to hedge its liabilities portfolio in the coming months. Panchpakesan Bala Subramanian, chief manager of the treasury in Mumbai, said that with board approval, which is just a formality, the firm will look to re-enter the interest-rate derivatives market by December and start using crude oil derivatives in January. Its exposure to imported oil in the first quarter will be approximately 20 million barrels, which was equivalent to USD536 million on Friday.

The Hong Kong branch of Italian bank IntesaBci is considering buying into its first synthetic CDO in Asia. Rebecca Chang, associate director of the structured finance and advisory group, said the bank is studying the feasibility of investing in such structures as new issuances in the Asian convertible bond market, where IntesaBci normally invests, have been drying up in recent months. Chang continued that she has yet to contact any potential counterparties as it is in the initial stages of evaluation and that she is in touch with the European offices of IntesaBci about the possibility of investing in synthetic CDOs referenced to a basket of Asian names. No time frame has been decided.

Korean cross-currency interest-rate swap spreads are expected to widen over the next month as more than USD1 billion of asset-backed bonds come to the market. Kookmin Card, LG Capital, Hyundai Card, Samsung Capital and Samsung Credit Card all plan to issue asset-backed securities, according to traders, who added the companies intend to enter swaps to hedge their foreign exchange and interest-rate exposure. "The ABS market is hot in Korea," noted one interest-rate trader. He added that ever since the success of the first off-shore ABS transaction by Samsung Capital in April corporates have been lining up to execute similar deals (DW, 4/8).

The first swap agreement took place between IBM and the World Bank in the early 1980s. Since then sophisticated products have been developed to meet the needs of capital markets players searching for higher returns for investors and more efficient hedging tools as well as offering new financing means for international companies. In order to handle these new complex products and to manage their risk, a range of pricing models have been introduced over the last few years.

Taiwan Life Insurance, with over USD2.1 billion in assets, is considering purchasing structured products such as structured notes, synthetic CDOs and equity-linked notes. Jenny Chen, financial products fund manager in Taipei, said the insurer is now considering structured products to obtain enhanced yield. She continued the insurer is submitting an application to the Ministry of Finance, as insurers are currently not allowed to invest in products such as CDOs. Johnson Lai, head of finance in Taipei, believes the MoF will likely acquiesce as insurers and several international investment banks are lobbying it, and Taiwan Life will be able to invest in these within six months. Calls to the MoF were not returned. One market official in Hong Kong said that although his bank is not directly speaking to the MoF, he knows of several insurance companies in Taiwan that are in talks, adding the rules could change within two or three months.

Singapore-based asset manager Kenrich Partners is considering buying its first equity-linked note. Richard Loh, managing director at Kenrich, said the firm is looking into using the structured products but added that no time frame has been established. "We're still in discovery, no conclusions have been made yet," added Loh. Kenrich would first establish criteria to follow, and then make its decision on whether to invest in the product, said Loh, declining to elaborate.

William Blair Investment Management is seeking to sell $100 million of off-the-run eight- to 10-year U.S. Treasuries in order to purchase lower quality triple-B rated corporates. The move will reduce duration to 85% that of the firm's benchmark, the 3.75-year Lehman Brothers Government/ Corporate index. Bentley Myer, portfolio manager of $2 billion in taxable fixed-income, says he needs to see consistent job growth of 100,000 to 150,000 per month and signs that weekly jobless claims will stay below 390,000 and continue to decline, before he makes the shift. In addition to using the cash from the sale of Treasuries, the firm may buy corporates with some of the money it raises through refinancing of mortgage-backed securities, or it may keep that money in cash.

Wright Investors Services is pondering adding up to 5%, or $125 million, to its mortgage-backed securities allocation. James Fields, portfolio manager who manages $2.5 billion at the Milford, Conn. firm, says he is waiting for 10-year interest rates to stabilize near 5%, 30-year mortgage rates to go above 7%, and an improvement in corporate earnings, before making the move. Fields says he has been buying 15- and 30-year 6.5% and 7% paper, but will look at 7-7.5% bonds as rates begin to rise, in order to take advantage of a lower prepayment risk environment. He says the firm mostly owns Ginnie Mae bonds, although he says he has been adding Freddie Mac and Fannie Mae pass-throughs recently, as they have widened relative to the federally guaranteed Ginnie paper. Fields says the firm will likely sell five-year Treasuries to finance the move, as Treasury yields have been quite low recently given the broad-based fixed-income rally, and he wants to stay close to Wright's bogey, the 4.6-year Lehman Aggregate index.