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BondWeek is the leading news publication for fixed-income professionals, covering new deals, structures, asset-backed securities, industry and market activity.

BondWeek is the leading news publication for fixed-income professionals, covering new deals, structures, asset-backed securities, industry and market activity.

Citigroup has used over-the-counter equity options to structure a five-year preference share investment, called the Extra Income Plan. The product, which is referenced to the FTSE 100, gives investors two options, one of which offers buyers either 8% annual income, 1.93% quarterly income or 43% growth after five years and the second gives them either 6.25% annual income, 1.5% quarterly income or 33% growth after five years, according to Daniel McNeill, structurer in the equity derivatives group at Citigroup in London.

Volumes in the AUD1 billion (USD655 million) capital protected loan business have plummeted by 35-50% in recent weeks after the government announced a proposed change to the accounting of embedded derivatives. Last month the Commonwealth Treasury of Australia said it plans to amend the tax treatment of capital protected products to include the cost of the capital, typically an embedded over-the-counter put, to be treated under capital gains tax rather than accounted as an interest component that had been tax deductible. Legislation to spell out the changes is pending but in the meantime, no clarification has been released by the government to outline specific measures.

Citigroup Global Markets Australia has hired Andrew Best, derivatives sales at Macquarie Bank in Sydney, in a new role as head of institutional sales in Sydney. Luke Randell, managing director in trading and derivatives in Sydney, said Best will be responsible for running the institutional sales team of five, marketing over-the-counter and exchange-traded instruments, program trades and convertible bonds. "We were waiting for the right guy," said Randell, to whom Best now reports. The institutional sales team had previously reported to Randell.

Deutsche Bank and Dresdner Kleinwort Wasserstein are looking at securitizing the counterparty risk in their derivatives books for the first time. Although neither firm has made a commitment to the transaction, Deutsche Bank is further down the road and expects to structure a deal within six months. Peter Haagensen, director and global risk officer for over-the-counter derivatives at Deutsche Bank in London, said any deal it brings to market likely will have a notional size of at least USD1 billion with a maturity of five to 10 years. The only other firm known to execute this type of transaction is UBS Warburg, which did two transactions, Alpine I and II, in which it securitized counterparty credit risk from its interest-rate swaps, options and currency swaps books (DW, 10/17/00, DW, 9/2/02).

One-month implied volatility shot up last week to a high of 11.2% Monday from 9.65% the Wednesday before amid concerns that the Bank of Japan would allow the yen to strengthen further against the dollar. As evidence of BoJ intervention in the currency grew and the dollar eased from the JPY115 mark--a two year low--option volatility retraced to stand at 9.5% Wednesday, according to a trader in New York.

Irene Garber, an equity derivatives trader at Commerzbank Securities in New York, is heading across town to Lehman Brothers for a similar role in the firm's proprietary trading operation. Mark Sanborn, managing director in proprietary trading at Lehman and to whom Garber likely reports, did not return calls.

Deutsche Bank is transferring Ralph Reynolds, global head of trading for equities in New York, to London because its geographic position makes it a better place to manage a global business, according to Rohini Pragasam, spokeswoman in New York. Reynolds, who did not return calls, is responsible for Deutsche Bank's convertible bond trading, program trading, equity finance, prime brokerage, cash trading and equity derivatives trading desks.

A division of the Dutch ministerie van Financiën is reviewing its credit and foreign exchange rate exposure and may use derivatives for the first time to hedge its risk. "We want to get a better understanding of the risks we are facing. The next stage is then to manage those risks," said Maarten Verway, head of the export credit insurance and investment guarantee division in the Haag.

Morgan Slade, former head of statistical arbitrage trading for the proprietary desk at Merrill Lynch in New York, has resurfaced at Dallas-based hedge fund Carlson Capital. Slade left Merrill earlier this year when the firm ceased its statistical arbitrage desk (DW, 1/12). He joined the BBT Fund, a multi-strategy relative value fund with approximately USD2 billion in assets under management that is associated with Texan billionaire brothers Sid and Lee Bass, this year (DW, 2/16). However, he also fell victim to cuts made by this fund, which recently closed its volatility and statistical arbitrage portfolios, said officials familiar with the changes.