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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.

Crédit Agricole Indosuez is structuring a USD660 million synthetic collateralized debt obligation referenced to AAA rated asset-backed securities. The deal, dubbed ABSolute, is expected to be launched in the coming weeks, according to officials familiar with the deal. Structurers at CAI declined comment.

Andrew Kresse, principal in structured credit products at Banc of America Securities in New York, has jumped to Barclays Capital for a similar role. At BofA, Kresse headed the sales activity of structured products to financial institutions. In his new role Kresse will head all structured credit sales, according to officials.

Credit-linked note issuers using default swaps to hedge credit exposure will be exposed to significant basis risk under the International Swaps and Derivatives Associations' proposed 2003 credit derivatives definitions, which are due to be implemented May 6, according to lawyers. Some European dealers have asked ISDA to amend the definitions, but an official at the trade association said there is no intention to issue an amendment on this point, adding the definitions were discussed at length and had support up to their publication. Credit-linked notes account for around 8% of the credit derivatives market, according to the British Bankers' Association (DW, 9/22).

Deutsche Bank is on the hunt for the first hybrid credit derivatives trader to sit within its North American Structuring Group, which develops structured interest-rate products for clients. Jon Kinol, managing director and head of OTC trading for North America in New York, said that by building a hybrid structuring expertise within the group, the firm will be able to offer clients structures that benefit from different correlations between the two asset classes.

JPMorgan has hired Yanghui Wang, quantitative analyst at Lord Abbott, as v.p. covering market risk for equity derivatives in North America in New York. Bob Henderson, who had previously filled the role, has taken on responsibilities as head of foreign exchange and commodities derivatives research. The move was initiaited by Henderson's desire to step back into the FX arena, said an official familiar with the change.

An International Swaps and Derivatives Association survey showed around 70% of the 20 major credit derivatives participants in Japan were in favor of dropping restructuring as a credit event from credit derivatives documentation, but dealers are unlikely to cut the clause. "Even though they voted for this it's unlikely it will happen anytime soon--they voted for modified restructuring as well and that died after a week," said one credit trader. Dealers attempted to introduce the modified restructuring credit event in October 2001 but failed due to a lack of end user interest (DW, 10/21/01).

JPMorgan plans to tighten up its third party distributor due diligence in preparation for its structured equity products being marketed to a wider European retail base in February. The effort, dubbed KYD or 'know your distributor', is designed to prevent the firm becoming embroiled in potential law suits and negative publicity that could arise if its structured products are distributed to inadequately informed or unsuitable retail investors. "When you are dealing with a retail investor, the risk of reputational damage rises substantially," explained Tim Hailes, assistant general counsel in London. "And the fact that you can sell a product to them doesn't necessarily mean you should," he continued.

Daehan Fire & Marine Insurance, with over USD700 million in assets, is gearing up to purchase credit derivatives for the first time. "We're looking at credit-related instruments for the new fiscal year," said Sei Young Park, manager of the investment department in Seoul. Daehan plans to purchase credit-linked notes or tranches of synthetic collateralized debt obligations for its USD400 million fixed income portfolio. The insurer will start out small, likely USD5-10 million. Daehan traditionally reassesses its asset allocation at the onset of the new financial year, April 1, explained Park.

The Bank of Korea, South Korea's central bank with USD120 billion in foreign reserves, is eyeing purchasing derivatives for the first time, according to DW's sister publication Global Money Management. An official at the bank said it is exploring using interest rate and currency swaps for its USD12 billion bond portfolio, which is primarily invested in AAA government bonds. "We're studying swaps for hedging as well as duration targeting," said the official. "As foreign reserves in Asian central banks have been growing...we need to target greater returns," he added. He explained that as the reserves continue to grow in Korea from USD96 billion in 2000 to USD120 billion, the central bank is looking at derivatives. The official declined comment on a specific timeframe for its plans.

Schroder Salomon Smith Barney has grabbed the top spot in Derivatives Week's first-ever ranking of structured medium-term note issuance, but the U.S. bulge bracket firm has had a slow start so far in 2003.