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DSP Merrill Lynch is establishing an onshore Indian rupee interest rate derivatives desk and is looking to begin trading by year-end. "The Indian market is still in development mode," said Jayesh Mehta, head of debt in Mumbai. "There's lots of potential," he added.

Rafael Berber, former head of the global equity-linked group at Merrill Lynch in London, has been appointed to the new role of vice chairman of global capital markets and financing. Berber was displaced from his previous role following a reorganization that saw Simon Brookhouse, managing director and head of equities for the Pacific Rim in Hong Kong, head to London to take over Berber's responsibilities (DW, 9/14).

New Smith Financial Solutions has received its Corporate Finance Advisory license from the U.K.'s Financial Services Authority. The firm is an independent boutique specializing in risk management advisory, such as selling non-core assets. It was set up earlier this year by former Merrill Lynch professionals T.J. Lim, ex-global debt capital markets coo, Glenn Barnes, former European head of structured credit, and Kevin Krespi, ex-head of debt for the Pacific Rim (DW, 7/7).

Energy producerPNM Resources entered a Treasury lock to hedge interest rate risk before its principal subsidiary, Public Service Company of New Mexico, issued USD300 million in bonds on Sept. 10. Kirk Meyer, treasurer at PNM Resources in Albuquerque, N.M., said it executed the Treasury lock approximately a fortnight before the bond sale because it was happy with the rates. He declined to elaborate.

Asian markets have been awash with a variety of vanilla equity-linked notes and capital guaranteed structures in the last three years in an attempt to meet investor demand for yield in a low interest rate environment. However as stock and index volatilities have declined and equity markets have rallied, equity-linked products have evolved that allow coupons to be accrued or stock accumulated over the life of the note.

Citigroup is working on a USD500 million collateralized loan obligation for PIMCO that will reference pro-rata loans, and will be only the second actively managed CDO to tap the much maligned revolver and "A" loan portion of the capital structure. The deal is said to mimic a structure Citibank created earlier this year for TCW Group, said a market official.Powell Thurston, a PIMCO product manager, and a Citi spokeswoman declined comment.

SG Securities has reshuffled its New York equity desk. Philippe El-Asmar, head of equity derivatives structuring for the Americas, has been promoted to head of retail sales. El-Asmar referred calls to Jim Galvin, spokesman in New York, who said Marc Saffon, head of financial engineering, has assumed El-Asmar's responsibilities. Galvin declined to elaborate on the changes. Saffon referred calls to Galvin.

While interpreting violent market movements can potentially be illuminating, many experienced finance practitioners shy away from this exercise, having recognized the difficulty of the task. At the same time, the majority of them appear to have accepted the premise that supply-and-demand dislocations have emerged as increasingly influential forces driving the fixed income markets. Their impact on interest rates, credit spreads, and implied as well as realized volatilities rivals that of geopolitical events, economic fundamentals, and credit crises. Paradoxically, the adoption of similar risk management practices by a large proportion of the financial system has become an extremely potent technical factor that may exacerbate market volatility and result in financial losses. One cannot help but wonder whether the creation of the field of risk management, directed toward protecting institutions from financial losses and decreasing the overall volatility, has at times become a self-defeating prophesy. Obviously, the realization of risk management's potential to affect market behavior, particularly as it applies to dynamic hedging strategies, is not new.

A gradual improvement in corporate credit quality and the subsequent fall in volatility have lead to a sharp drop in credit derivatives volumes, according to a straw poll conducted by DW. This is in marked contrast to last year's British Bankers' Association survey which forecast the market would more than double by next year (DW, 9/22/02). "There are fewer hedge funds buying cheap shorts, fewer convertible arb funds hedging credit risk and the loan houses aren't hedging anymore," said Chris Francis, head of international credit research at Merrill Lynch in London.

"Globally we're a top-tier firm but we've been second-tier and underperforming our own platform in Japan. This is the first step in correcting that."--Sharon Mitchell, Asia-Pacific head of fixed income, rates and currencies at UBS in Sydney, commenting on the reasons why the firm hired a star credit sales professional from Merrill Lynch. For complete story, click here.

Aaron Ford, executive director in equity derivative sales at UBS in Stamford, Conn. has taken a similar position at KBC Financial Products. Jason Cuevas, managing director in New York, who heads the KBC's North American trading business, said Ford is filling a newly created seat. The hire is part of the firm's plans to build its U.S. derivatives presence. Ford was a big producer at UBS and was a great hire for the firm, he added. Ford reports directly to Richard Winter, head of equity derivative sales in New York.

UBS has hired Masahiro Sekino, managing director in credit sales at Merrill Lynch in Tokyo, for a new role as head of structured credit products in Tokyo. Sekino is well-known as a star producer in Japan and built his reputation at Morgan Stanley before joining Merrill last year (DW, 5/26/02), according to rival credit professionals.