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Dollar/yen implied volatility fell last week ahead of President Bush's visit to Asia. Bush, who started a week-long visit to Asia on Thursday, is expected to make a speech regarding the strength of the dollar versus the yen. Traders predict this will result in a stronger yen, but were not trading around the likely outcome of the speech. Spot traded at JPY109.4 last Wednesday, compared with JPY109.6 the week before.

Credit Suisse First Boston is working on what is thought to be the first synthetic index of leveraged loans constructed as a credit derivative. The existence of an index will boost liquidity on default swaps referencing secured debt. Leveraged loans is a growing area of fixed income, but is not well developed as a reference entity for credit derivatives. As liquidity in the credit derivatives arena develops it is a natural extension to apply this technique to the secured debt market. David Carlson, global head of developed markets credit derivatives in New York, said the index is an extension of its research capabilities and is designed to boost liquidity and transparency in credit derivatives on leveraged loans. He declined to elaborate on its structure.

Five-year credit protection on DaimlerChrysler tightened last week because collateralized debt obligation houses were selling protection to structure CDOs. Credit protection on the corporate tightened 13 basis points in a week to 102bps Thursday, said a London-based trader. Other European auto stocks also saw a narrowing of credit-default swap spreads. For example, Volkswagen moved to 51bps from 61bps in the same period.

Fitch Ratings has reorganized its European structured finance team because Chris Hillard, head of commercial-mortgage-backed securities, quit to join Goldman Sachs. In the reshuffle, Huxley Sommerville, head of synthetic CDOs, takes Hillard's former role and Fitch has hired Richard Gambel, head of credit for Bank of Montreal-owned Links Finance, to fill Sommerville's shoes, according to Kenneth Gill, head of CDOs in London.

Réseau Ferré de France, which owns the infrastructure of the French railroad, has entered a cross-currency interest rate swap on a recent 32-year GBP50 million (USD83 million) bond. In the swap, the government agency receives the 5.2% coupon on the bond and pays fixed-rate euros. The official said the maturity of the swap matches that of the bond.

Indigo Partners, a New York-based hedge fund start-up run by a former Goldman Sachs official, is preparing to launch an Asian-focused convertible arbitrage fund early next year. Indigo Capital will focus on Korean, Japanese and Taiwanese convertible bonds, according to Richard Han, managing partner and formerly assistant v.p. on the equity derivatives and convertibles desk at Goldman in New York. The firm also plans to trade in Hong Kong in the near term and possibly in China, he added.

InterContinental Hotels has entered a floating-rate swap to convert part of a recent EUR600 million (USD702 million) 10-year bond. Anthony Stern, head of treasury in London, said it is the firm's policy to hedge around half of the liabilities. He added it would consider hedging more of the bond if swap spreads and absolute rates rise.

Govett Investments, a major issuer of capital guaranteed products structured with options, plans to launch its first investment instrument that uses a dynamic trading method to provide the protection. Conrad Preece, associate director in London, said one of the reasons Govett is considering switching from using zero-coupon bonds and an option to Constant Portfolio Proportion Insurance (CPPI) because low interest rates have made option strategies less attractive.

HSBC Securities has purchased EUR1 billion (USD1.16 billion notional) in reverse knock-out euro calls/dollar puts. Traders said this is double the usual size of such trades. This size of option is only executed a couple of times a year, noted traders. Kathleen Rizzo Young, spokeswoman at HSBC, could not comment by press time.

ING Financial Markets has hired Achara Sapcharoen, credit derivatives trader at Bear Stearns in Tokyo, in a similar role on its fixed income desk in Singapore. Sapcharoen, who starts early next month, will report to Mark Newman, head of financial markets and Asian head of the structured products group in Hong Kong. Newman declined comment and Sapcharoen could not be reached. Market officials noted that she is likely a replacement for Trevor Vail, credit derivatives trader, who moved to Royal Bank of Scotland in Tokyo earlier this year (DW, 4/27).

HSBC, often considered to punch below its considerable weight in the financial markets, is preparing a major push into foreign exchange that it expects will see its structured fx business double to USD50 billion (notional) in the next 12 months. Mike Powell, treasurer and head of global markets-Europe, said it will roll out structured products that have worked in Asia and broaden its global product range.