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Deutsche Bank and JPMorgan are making a push to sell credit-linked notes to European corporates and Merrill Lynch is preparing its first deals. JPMorgan executed its first deal four months ago and has seen corporate demand for these notes rise to 10% of its total CLN operation, said Carlos Fernandez-Aller, v.p. and head of corporate credit derivatives for southern Europe and emerging markets in London. Tony Main, v.p. in the global credit derivatives group at Merrill in London, said the firm has a handful of deals in the pipeline. Deutsche Bank has already executed several CLNs for corporates since it started offering the products three months ago and has further deals in the pipeline, according to Mark Stainton, director and head of exotic credit trading at Deutsche Bank in London.

HSBC Asset Management has entered equity call options to structure a capital guaranteed fund referenced to the FTSE 100. Bryan Greener, head of product development-global products, said the fund, dubbed the Safe Haven Growth Fund, gives 100% capital protection as well as guaranteeing 100% participation in gains in the index. HSBC anticipates taking out similar options in order to roll out more products in the coming months.

Exotic foreign exchange structures on Asian currencies are growing in interest and volumes could double next year. "We're seeing a lot of cutting edge stuff," said Louis Cucciniello, v.p. of global fx options at JPMorgan in Singapore, adding, "A lot of products found in the G-7 currencies are now being offered in the regional [markets]." He continued that such instruments, as currency hybrid products, which contain exposure to interest rate, foreign exchange and commodities risk, typically structured in note form with embedded options, are becoming fashionable on regional currencies.

HVB Group, the investment banking arm of HypoVereinsbank, plans to hire two more staffers for its convertible sales and trading desk, which includes a convertible bond arbitrage operation. Inderjit Bedi, head of convertible distribution in London, said he is looking for a hedge fund salesman--who will sell credit derivatives--and a convertible bond and arbitrage trader with a hedge-fund client focus. After the last two hires are in place, the group will begin trading securities. In total the group will have five in sales, six in trading and two in research. The sales team targets hedge funds as well as fund managers, pension funds and insurance companies.

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.