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Race Starts For Hybrid Note Sale

BNP Paribas and Deutsche Bank have started marketing hybrid notes in Taiwan's nascent onshore credit market and the race is on to complete the first transaction. The notes will give investors exposure to both the credit derivatives and interest rate market. C.G. Lai, head of fixed income at BNP in Taipei, said credit-linked structures are a natural extension of the growing interest-rate product market.

Lai expects the first hybrid notes that combine products such as inverse floaters with credit risk on Taiwanese names to close within the next two months. Market officials said that Deutsche Bank has also started marketing such products but fixed income officials at the firm declined comment.

Credit Lyonnais is the only other firm that has a license to trade these products in Taiwan. An official said clients are still getting to grips with plain-vanilla credit derivatives and are not yet ready for more exotic structures.

An official at JPMorgan added that it also plans to market such products, once it obtains its license for onshore credit derivatives in the coming weeks. The onshore Taiwan-dollar denominated credit market kick-started at the onset of the year (DW, 1/26).

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