Free content

Public Service Electric & Gas Co., a publicly traded energy company, is considering entering an interest-rate swap before year-end. Mark Kahrer, assistant treasurer in Newark, N.J., said the corporate is weighing up the possibility of entering a fixed-to-floating rate swap as a means of managing its asset and liability mix. The corporate regularly enters swaps to hedge its interest rate exposure, he added.

Credit

Royal Bank of Scotland has hired Saurabh Sah, volatility trader at EA Capital in London, to trade equity index options. Sah trades both exchange-traded and OTC options for the non-eurozone desk which includes U.S. and U.K. indices, noted Mike Asplin, head of equity index trading. Sah reports to Asplin.

Collateralized debt obligation issuers have started to structure true sale CDOs that feature puttable money market notes. As well as reducing funding costs, issuing short-term notes to fund CDOs has the added advantage of opening up the approximately USD2 trillion U.S. money market as a source of financing. Major derivatives houses, includingJPMorgan , are planning to bring such deals to the market, according to an official at the firm. Darren Esser, associate director at Standard & Poor's in New York, said the ratings agency is getting more and more enquiries from potential issuers, many of which would be debutants.

Lehman Brothers has hired Corrinne Teo, fixed income marketer at Nomura Singapore, in a similar role covering Southeast Asia. Teo said her role includes interest rate and credit derivatives. She reports to Catherine Loh, general manager in Singapore. Loh, who joined last year from Goldman Sachs (DW, 10,6), was traveling and could not be reached.

Kuoni Travel, a Swiss travel company, is planning to buy dollar calls/Swiss franc puts and sell dollar puts/Swissie calls if the dollar depreciates against the Swiss franc by 1-2%. The company has already carried out a similar transaction in which it bought euro calls/Swiss franc puts and sold euro puts/Swissie calls. Markus Bieri, head of the treasury competence center in Zurich, said the firm would enter the transaction to hedge predicted further strengthening of the dollar and euro against the Swiss franc next year.

The relaunch of the Chicago Board Options Exchange Market Volatility Index (VIX), which will introduce the ability to trade futures and forwards on the index, will encourage more trading strategies that play off the equity and credit derivatives markets. Alex Reyfman, U.S. credit derivatives strategist at Goldman Sachs in New York, said the improvements made to the index, combined with increasing interest in trading options on credit-default swaps, will better allow strategies that trade aggregate spread volatility on default spreads against equity volatility. The old VIX had been difficult to hedge, which restricted the number of players employing such strategies. The new index will encourage traders such as hedge funds and proprietary traders, to trade across the two asset classes, he noted.

"Given the low interest rate environment, insurance companies are going crazy for these types of notes."--Gin Lee, treasurer at Crédit Agricole Indosuez in Seoul, commenting on why several insurance companies are starting to turn their attention to the synthetic collateralized debt obligations market. For complete story, click here.

Fubon Securities, with over TWD64.5 billion (USD1.88 billion) in assets, is considering investing in a second synthetic collateralized debt obligation, possibly by year-end. The securities house became the first Taiwan-based entity to purchase a CDO tranche earlier this year (DW, 5/4). "It's still an attractive product," said George Huang, senior project manager in the fixed income and derivatives department in Taipei, noting that although credit spreads have tightened in globally, CDOs offer a higher yield than traditional fixed income instruments.

The calm before the storm...After postponing a planned New York Harbor cruise last month because of the blackout, Banc of America Securities' global structured products group decided to reschedule the event for Sept. 17, the day before Hurricane Isabel was set to lash the U.S. Fortunately, according to one loan manager, the weather held out and the party was smooth sailing.

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.

Jonathan Knight and Rick Lyon, managing directors and co-heads of convertible arbitrage proprietary trading at Goldman Sachs in New York, have both left the firm. Ed Canaday, spokesman in New York, said Knight and Lyon left several weeks apart from each other, with their responsibilities being assumed by existing members of the team. Knight and Lyon could not be reached.