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The UK government's PFI scheme returned to familiar territory this week as BNP Paribas closed a £372m index-linked bond to fund a new hospital - the largest bond yet in the asset class and the biggest PFI deal so far this year. Wrapped by MBIA, the bond will provide the Skanska/Innisfree consortium with funding to design, construct, equip and maintain new facilities for the University Hospitals Coventry and Warwickshire NHS Trust. The hospital, due to be completed within six years, will be the largest hospital built in the UK in the last three decades. Like several of the previous eight hospital securitisations closed since 1997, the deal is index-linked, allowing the borrowers to match their liabilities with revenues, which are linked to inflation.

UK mortgage lender Mortgages PLC this week continued the traditional year-end rush of non-conforming RMBS with a £257m securitisation of owner-occupied and buy-to-let mortgages. The transaction was lead managed by Barclays Capital and Lehman Brothers - the same banks that closed the company's last issue. The deal follows a busy quarter for the non-conforming mortgage sector, with Kensington Mortgage, Preferred Mortgages and Southern Pacific Mortgages all closing deals. Spreads in the asset class have widened since Preferred came to market in late September, and one established buy-to-let lender, Paragon Group, even chose this week to postpone an issue until next year due to market conditions.

SNS Bank Nederland returned to its established Hermes programme this week with a Eu1.12bn securitisation of residential mortgages, lead managed by ABN Amro and JP Morgan. SNS has been a regular issuer in the ABS market since October 1999 with over Eu3.8bn of mortgages outstanding, and the latest deal was marketed with just two weeks of roadshows and sold to around 25 investors.

VR Leasing, the leasing specialist for Germany's co-operative banking movement in Germany, this week launched a Eu174.5m synthetic securitisation of finance lease contracts. DZ Bank, the co-operative banks' central bank, lead managed the deal, buying at closing a portfolio of loans from VR and transferring the risk through a default swap with the SPV. The top three tranches of public notes are invested in DZ's own covered bonds structured specifically for the deal, rated triple-A.

Bayerische Hypo- und Vereinsbank (HVB) this week sought capital relief with a Eu5bn partially funded synthetic securitisation of German residential mortgages, arranged and lead managed by the bank's investment banking arm. HVB has been a regular ABS issuer this year, with offerings from the Geldilux brand as well as through KfW's Provide programme. It expects its issuance tally to reach Eu25bn by the end of the year.

Cassa di Risparmio di Firenze, a regional savings bank based in Tuscany, this week returned to the securitisation market after a three year absence with a Eu512m securitisation of residential mortgages. The issue was lead managed by two of its shareholders, BNP Paribas and Banca IMI. Carifi's first deal, Perseo Finance, was just the second agency non-performing loan securitisation in the country. It has recently been upgraded by Moody's.

ABN AMRO plans to focus on exotic structured equity derivatives in the coming year and has hired two traders to achieve that goal. Alberto Cherubini, v.p. and equity derivatives trader, and Faisal Khan, director and equity derivatives trader, at Schroder Salomon Smith Barney in London have joined as senior equity derivatives traders. Both will report to Paris Badkas, global head of equity derivatives trading. Khan started a week ago and Cherubini is due to start today.

The Province of British Columbia has entered into a foreign exchange swap to convert the proceeds of a recent CHF400 million (USD274.7 million) bond offering into Canadian dollars. An official in Victoria, British Columbia, said the province never takes on unhedged Swiss franc-denominated debt. The bond was issued in a foreign currency in order to take advantage of attractive foreign exchange rates between the Swiss franc and the Canadian dollar, he added, declining further comment.

Volatility on dollar pairs including euro/dollar, cable and dollar/yen eased last week as fewer trades were executed in the run up to the holiday-shortened Thanksgiving week. Last Wednesday three-month euro/dollar volatility stood at 9.15%, down from around 9.5% where it had hovered the week before, noted one trader in New York. Euro/dollar traded at USD1.0015 last week having traded close to USD1.01 the previous week.

Commerzbank has hired Stephane Carty and Vincenzo DiGennaro, equity derivatives traders at Lehman Brothers, to trade industry sectors. They will report to Eduardo Bastida, global head of equity derivatives in London.

Deutsche Bank has set up a global credit arbitrage investment arm that will scour the market for fixed-income securities and then either repackage or keep them on its balance sheet. The firm, dubbed Winchester Capital Principal Finance after its address at Great Winchester Street, London, could have a balance sheet topping hundreds of millions of dollars, according to market officials. Deutsche Bank decided to set this up now because the CDO market has reached a size where it makes sense to have an independent entity investing in different CDOs, according to market officials. Another official speculated that Deutsche Bank had not turned its attention to this before because it was making so much money from its structuring desk, however, now that CDOs are becoming harder to shift and margins are decreasing, it is looking for new opportunities.

The U.S. Internal Revenue Service has filed its answer to a petition made by two taxpayers regarding the taxation on proceeds of a so-called Structured Yield Product Exchangeable for Stock (STRYPES), according to court papers. In the impending case, to be heard at the United States Tax Court, the Internal Revenue is seeking that Bobby and Delaine Stevenson pay nearly USD25 million of tax on gains made from the transaction.