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Christian Noyes, a high-yield portfolio manager with Penn Capital Management, is repositioning the firms high-yield portfolio by moving down the credit curve. The move is designed to take advantage of what Noyes sees as a prolonged period of spread tightening for select high-yield credits, as well as the anticipation that an economic recovery is impending. Noyes predicts an upswing for the high-yield sector for two reasons. First, the normalization of the yield curve brings a positive carry on holding inventory, which leads to more liquidity and less risk perception in the market. Secondly, there have been consistent cash flows into the high yield sector since the year began.

Henry Schmeltzer, executive director of structured credit trading, has joined Merrill Lynch as head of structured credit products for Europe, Middle East and Africa in London. The position is part of an expansion to the team, according to a spokesman, who declined further comment.

AIG Financial Products has hired Jeffrey Robbins, ceo of derivatives boutique First Chicago Tokio Marine Financial Products in Tokyo, and a 15-year veteran of First Chicago/Bank One, as managing director, marketing in Tokyo. In this new position Robbins is responsible for marketing the firmÕs structured financial products. AIG FP likely will expand the operation with additional hires, Robbins noted, declining to elaborate.

Basis Capital, a relative value/arbitrage hedge fund in Sydney with AUD20 million (USD10.2 million) under management, recently purchased credit default protection on Australian packaging firm AMCOR to hedge a long position in convertible bonds issued by the company. Steve Howell, cio in Sydney, said the hedge fund purchased protection at LIBOR plus 60 basis points. He declined to reveal the notional size, tenor or counterparty.

Mike Reeber, global head of convertible bonds at Deutsche Bank in New York, is moving to Tokyo to become head of Asian equity derivatives. Rick Goldsmith, global co-head of equity derivatives in New York, said the move follows the departure of Masatoshi Inoue, who quit the world of banking to work for a software company in Seattle (DW, 4/23). Reeber will report to Goldsmith and Ralph Reynolds, global co-head of equity derivatives. Reeber and Reynolds were traveling and could not be reached.

Ross McIntrye, manager in the weather derivatives group at Enron in London, resigned last week to join Deutsche Bank's nascent weather derivatives group. McIntrye will report to David Pearse, who heads the weather derivatives desk at Deutsche Bank in London. Officials familiar with the move said McIntrye's contract requires him to stay out of the market for three months. However, Enron is believed to be considering revoking this clause to speed up Deutsche Bank's fledgling effort in order to boost liquidity. Deutsche Bank is one of the largest banks to start a weather desk (DW, 5/20).

Volumes in yen puts/dollar calls doubled last week as the yen depreciated against the greenback to JPY123.74 and the market predicted a further slide. One trader said banks were buying yen puts with strikes between JPY127-JPY128 with maturities out to nine months. The demand for yen puts/dollar calls caused the 25-delta risk reversal to spin around from 0.1 in favor of yen calls/dollar puts two weeks ago to 0.5 in favor of yen puts/dollar calls last Thursday. A U.S.-based trader estimated USD2 billion (notional) of yen puts traded last week, which is the approximate typical volume for the whole dollar/yen options market on a normal week.

Dresdner Kleinwort Wasserstein and KBC Derivatives are attempting to lure investors back to the Italian reverse convertible market by structuring products with lower risk profiles. Alfredo Paramico, head of equity derivatives for Dresdner Kleinwort Wasserstein in Milan, said convertible volumes have fallen to between 5%-10% of last year's levels because investors lost about 70% of their principal investments. As a result structurers are attempting to come up with defensive products which still offer reverse convertible like returns, he noted.