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RBS Financial Markets and Fortis Investment Managers have launched an innovative investment grade collateralised debt obligation using total return swaps to switch between cash and synthetic exposures. Rubens CDO 1 is one of just a handful of hybrid CDOs to use a partially funded capital structure while gaining exposure to the underlying markets in both cash and synthetic format. This allows the asset manager to seek out arbitrage opportunities between the cash and synthetic market, and to access assets that are more liquid in cash form.

Royal Bank of Scotland this week launched a £111.74m PFI bond for Road Management Group. The funds will be used to design, build and maintain a 53km upgrade to the A1(M) road between Darrington and Dishforth. RMG is owned by a consortium of construction firms comprising Amec, Alfred McAlpine, Dragados, and Kellogg Brown & Root. The design, build, finance and operate (DBFO) concession has been granted to Road Management Services (Darrington) Ltd, and is financed by the SPV, Road Management Services (Finance) plc. The project will widen two sections of the road from two lanes to three.

Finance officials from the world's most powerful industrial nations will this weekend assess a radical UK plan to increase aid to developing countries using securitisation. The aim is to double the annual flow of aid to developing countries from $50bn to $100bn by persuading rich countries to make long term commitments to aid donations, which can then be securitised.

Citigroup/SSSB last Friday launched the first Dutch RMBS deal of the year, a Eu400m securitisation for GMAC RFC Nederland. E-MAC NL 2003-I BV is the first of several Dutch MBS issues due for launch in the coming months, including an expected Eu1bn deal from NIB Capital.

US-based property company ProLogis last week launched a Eu190m securitisation of purpose-built distribution facilities in four European countries via lead managers ABN Amro and JP Morgan. The deal is the fourth time the company has come to the European ABS market and follows a similar structure to deals closed in May 2001 and May 2002 by the same leads.

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A group of dissenting lenders for Hayes Lemmerz are said to be meeting with the bankruptcy judge this week to oppose the company's current plan for reorganization. The group is trying to get more value for the bank loan holders (LMW, 2/2), but the levels of the company's bank debt have remained in the 82 1/2 -83 1/2 range. Under the first amended joint plan of reorganization, lenders holding roughly $790 million in claims would receive a pro rata portion of the pre-petition lender's payment amount, 15 million shares of common stock in the reorganized company, as well as a portion of the adequate protection payments. Calls to the company were not returned by press time.

The Kiwi dollar interest rate derivatives market has seen its highest volumes since the mid-1990s in recent weeks as foreign corporates have turned to the currency to issue debt. Mark Currie, head of interest rate trading at Deutsche Bank in Auckland, predicted interest rate swap volumes could surpass last year's levels by 50-100%. He noted that eurobond issuances for the first quarter of last year was around NZD500 million and there has already been over NZD800 million in issuance half way through the first quarter this year.

This column will discuss the option-like exposures of a number of hedge fund strategies based on a review of the current literature. Specifically, recent academic articles have argued that implicit options arise in hedge fund products due to the following factors: * The tailoring of return-to-risk profiles to certain classes of

Credit default-swap trading on South Korea jumped last week on the back of heightened concerns about North Korea's nuclear policy highlighted by a change of outlook to negative from positive by Moody's Investors Service. "Trading has been three to four times normal volume," said one credit derivatives head, commenting on Korean default-swap protection. He added, "It's likely that some banks are getting nervous," noting that end users have been purchasing credit protection on the sovereign.

Credit Lyonnais is planning to start trading offshore over-the-counter equity derivatives on Indian names in the coming weeks. "This has huge potential," said Nicolas Cohen-Addad, head of equity derivatives in Hong Kong, adding, "People are becoming more interested in the Greater Asian markets including China and India." Lyonnais began Indian cash equity trading in November out of Hong Kong and expects to start offering OTC products in the coming weeks, said Cohen.

Erste Europäische Pfandbrief- und Kommunalkreditbank, a Luxembourg-based agency that lends to state authorities within the European Union, has entered a cross-currency basis swap to convert CHF200 million (USD147.67 million) of a recent CHF300 bond offering into a euro-denominated liability. Markus Thesen, head of treasury, said the EEPK converted a portion of the offering into euro-denominated exposure in order to provide a liability match for its asset portfolio, which is 60% denominated in euros, 30% in U.S. dollars and 10% in Swiss francs. In the swap, the agency is paying Euribor plus a spread and receiving Swiss franc LIBOR plus a spread. Thesen declined to be more specific. The swap matches the three-year maturity on the bond.