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JPMorgan has hired Andrea Mohr, responsible for corporate fx sales to Europe at Bank of America, as head of fx sales to German corporates. Jamie Bonic, head of institutional fx sales, said JPMorgan lost three salespeople for German corporates in June and hiring Mohr is part of the effort to replace them. "Germany is an important market for JPMorgan--it needs senior coverage and an experienced hand," Bonic noted. "We took our time and found Andrea." The firm has also reassigned existing members of the team to fill the coverage gap. Mohr reports to Eric Robin, head of corporate fx sales. Robin did not return calls.

Merrill Lynch has started marketing a new breed of first-to-default baskets designed to give investors a yield pick up by selecting "boring credits" with low vol rather than moving down the credit curve. As volatility in the credit markets has increased, investors, including insurers, fund managers and pension funds, have been asking for products with less volatility, said Chris Francis, head of international credit research at Merrill in London. Rather than moving down the credit curve and investing in higher yielding credits, investors can sell protection on names that lie in the middle of the total return distribution. "We are trying to point out which are the boring companies in the middle," Francis said.

MBIA has reached self-imposed risk limits for guaranteeing synthetic collateralized debt obligations and plans to diversify its portfolio via guaranteeing securitizations referenced to alternative asset classes, such as hedge funds and private equity. Chris Weeks, managing director and head of the global CDO and structured secondary markets portfolio in New York, told DW MBIA has reached its desired level of exposure for CDOs in the current environment, largely because the deals hitting the market have the same characteristics as previous CDOs it has guaranteed. By investing in new asset classes it can diversify its exposure. "Technical innovation is the lifeblood of CDOs," said Weeks. However, MBIA will still guarantee synthetic CDOs on a highly selective basis.

ING has named Leo Janssen, Asian head of financial markets in Hong Kong, as head of financial markets in the U.K. and chairman of its emerging markets committee. The position was created by the departure of Mark Fisher, global head of foreign exchange, money markets and derivatives and head of financial markets in the U.K., in July. The London-based position is a good opportunity to move back to Europe after a number of years building ING's Asian business, said Belgian-born Janssen. He starts in his new position this week.

Market participants in Korea are considering establishing a benchmark swap rate index through an initiative led by the Korean Swap Dealers Association. "We're going to discuss establishing our own swap rate fixing," said S.W. Hwang, head of derivatives marketing at Citibank and co-chairman of KOSDA in Seoul, noting that this will be the focus of today's meeting. Hwang believes that establishing a benchmark rate would provide more liquidity by creating a standardized rate. There are currently too many pricing discrepancies in Korean swap rates as quotes are listed on a variety of pages. The nascent trade association may list its own page for floating rates, from three months up to five years. The rate would be set by taking quotes from participating institutions, removing the highest and lowest rates, and averaging the rest, similar to the LIBOR fixing. "This will be helpful for end users," added Hwang.

Reseau Ferre de France, the French railway network, has entered a cross-currency swap on a GBP50 million (USD78.16 million) tranche of a recent GBP350 million 50-year bond offering, to convert the proceeds into euros. Vincent Gaillard, responsible for funding in Paris, said the agency entered the swap because it does not keep any currency exposure in sterling. RFF is an active issuer in the sterling market because there is more pension fund demand for long-dated paper in the U.K. compared with France. He declined to disclose the exchange rate for the swap. Reseau Ferre de France has funding needs of EUR1.2-1.5 billion in 2003, but Gaillard declined to specify how much of that would be issued in sterling--although he said since its creation in 1997, sterling has accounted for one-third of its issuance.

The Royal Bank of Scotland Financial Markets plans to start structuring synthetic collateralized debt obligations in Japan in the coming months. "We've been establishing the infrastructure," said Mamoru Kubo, head of interest rate derivatives marketing in Tokyo. RBS established a credit structuring business out of Hong Kong for non-Japan Asia earlier this year (DW, 8/18).

Credit-default protection on Suez turned full circle last week as credit concerns on utilities were countered with improving performance in equity markets, leading to some tightening of spreads. Five-year default swaps settled at 110-120 basis points Thursday, down from 125-150bps at the end of the proceeding week, but up from 95-105bps where they were trading last Monday, noted one trader. Interest in Suez has been dominated by large commercial banks, which are moving to protect their exposure to utilities, he added.

European hedge funds have started snapping up 10-year credit protection on sovereign names, including France, Germany and Portugal, which has resulted in spreads widening. One trader said his desk alone did USD1.5 billion in trades over the last several weeks--unusual in a market that could see weeks without a trade on a single sovereign name. Protection on Germany and France widened to nine basis points/13bps from 5bps/7bps two weeks ago, while protection on Portugal blew out to 16bps from 10bps. Traders said hedge funds also bought protection on Italy, Spain, Ireland and Belgium, but the core trades were on Germany and France.

Polaris Securities, one of Taiwan's largest securities houses with USD1.05 billion in assets, is examining buying credit-linked notes within a year, which would be the firm's first use of credit derivatives. "We're now considering this," said Ting Kuo, an official in the fixed-income department in Taipei. He explained that the firm is considering buying up to USD10 million of notes. "These offer a high rate of return," said Kuo, when comparing the products to traditional bonds.

An investor with a long or short position in an existing credit-default swap can monetise a change in the default swap premium, and realize profit and loss, in three ways:

"We are trying to point out which are the boring companies in the middle."--Chris Francis, head of international credit research at Merrill Lynch, speaking about its new first-to-default baskets, which are designed to have less volatility. For complete story, click here.