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Commercial banks and investment banks are squaring off amid the Financial Accounting Standards Board decision to reassess a ruling that loan commitments aren't considered derivatives. FASB is now reassessing the ruling as a result of pressure from investment banks, including Goldman Sachs, which went on the offensive in April to convince the board that the definition of a derivative should apply to credit arrangements. FASB insiders said Goldman laid out "persuasive arguments" as to why more loan commitments meet the definition of a derivative. They are aware of the problem banks may have with any change, but would be looking strictly at the technical aspects of the issue.

Fremont Investment Advisors, a San Francisco money management fund, has raised some $8.5 million in cash which it plans to invest in euro-denominated corporate debt and 30-year TIPS. Sandie Kinchen, portfolio manager of about $125 million, says she is waiting for the euro to stabilize before she invests. She says there is no particular level that would trigger a move, merely that it would have to stop declining in value. Companies she likes include Deutsche Bahn Finance, which she notes is a stable, old-economy credit. The moves will come out of the firm's $85 million global fund, which, at a 5.34 duration, is short the 5.87 year J.P. Morgan Government Bond Index.

Does the bank debt market lead to the good life? Depends on who you ask. One market veteran remembers his early years: "I'd get home from work at 9 every night, pass my wife in the hall and we'd say to each other, 'Why are we doing this?'" The answer was to get their dream home, which they now have and say was worth the toil. Still, life on a trading desk can come at a price. Some dealers are fueled on the promise of early retirement, but acknowledge the risk element of their job and say it's taxing on the mind and body. "At 25, I was still fully human," one 30-something trader recently quipped. "Now I get up in the morning and it sounds like Rice Krispies."

Northern Capital Trust has drastically shortened its duration toward its benchmark, the Lehman Brothers Government corporate index, and will remain short as long as the spread between Treasuries and underlying inflation remains compressed, says Greg Sweeney, portfolio manager with the Fargo, N.D.-based investment management firm. Meanwhile, Northern Capital is buying corporate bonds 20% shorter than the benchmark.

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.

Confident that the Federal Reserve easing policy has set the foundation for an economic recovery, Wells Capital Management will increase its MBS allocation by $100 million through the sales of some treasury bonds. In addition, and for the same amount, the firm will be moving down the credit spectrum on its corporate allocation in order to capture more yield, says Paul Single, portfolio manager with the San Francisco-based asset management firm.

The success of integrating WorldPages.com Inc. into TransWestern Publishing LLC is key to the credit quality of the San Diego-based yellow pages publisher. Moody's Investors Service has assigned a Ba3 rating to TransWestern Publishing LLC's proposed $300 million secured credit facility partially backing the acquisition, reflecting the risks associated with on-going acquisitive growth. Kendra Smith, v.p., senior analyst at Moody's, believes that "the company has proven themselves to be very effective in integrating previous acquisitions, but in the near-term the situation will be monitored, as this is a very large acquisition for them."

Moody's Investors Service lowered the rating of FleetPride Inc.'s $149 million senior secured bank facilities to B3 from B1 due to continued poor operating performance. Sales in the first three months of 2001 decreased by about 11% to $122 million and operating income decreased by more than 70% to $2 million as operating margin for the period showed significant reduction. FleetPride, headquartered in Deerfield, Ill., is the nation's largest independent aftermarket distributor of heavy-duty truck and trailer parts. However, the ratings also recognizes the strong equity sponsorship and support, and the market leading position of the company.

After holding steady in the 95 range, Nextel Communications debt took a point and a quarter dive late last week. Dealers maintain that the credit, which has risen above sector problems, should quickly pull itself back up. Nextel is based in McLean, Va. Calls to company officials were not returned by press time.

A $40-50 million block of Owens Corning's bank debt traded at 64-66 last Wednesday, which is up from the low 60s for the credit. Deutsche Banc Alex. Brown was rumored to be involved, although that could not be confirmed with officials. Owens Corning, based in Toledo, Ohio, manufactures fiberglass for vinyl siding and asphalt. "Operationally, the company is doing well. The reason we filed for bankruptcy is the asbestos situation," a company spokesman said. He declined to comment on trading levels. Deutsche Banc officials declined to comment.