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The growing trend among firms to merge their credit bond and derivatives desks has caused the two instruments to shadow each other more closely and reduced the number of relative-value opportunities. ABN AMRO (DW, 6/2), Deutsche Bank (DW, 7/14), Merrill Lynch (DW, 7/16) and Salomon Smith Barney (DW, 8/4), have all merged elements of their desks during the summer and several firms, including JPMorgan and Goldman Sachs, already have combined desks. This has caused the most obvious relative-value plays to be arbitraged away. That said, there is still a possible silver lining, Klaus Toft, co-head of credit derivatives quantitative strategies at Goldman Sachs in London, believes that as liquidity improves a whole range of relative-value trades that are popular in the interest-rate swaps market, such as curve trades, will be available.

Element Re Capital Products has hired Vijay Raghavan from the risk and derivatives team at ABN AMRO as a senior v.p. heading up research and product development. Raghavan, who has already left ABN, starts at Element Re in about month and replaces Bob Henderson, who joined JPMorgan earlier this year.

Bank Nederlandse Gemeenten, the principal Dutch public sector agency, has entered cross-currency interest rate swaps on two recent offerings to convert them to synthetic floating-rate bonds. The company recently issued a USD100 million bond and a GBP100 million (USD153.48 million) bond and converted the proceeds into euros.

Newfield Exploration Co., an oil and gas producer with annual revenue of roughly USD700 million, may enter its first interest rate swap after it completes its pending acquisition of EEX Corp. Terry Rathert, cfo in Houston, said any swap would convert a portion of a recent fixed-rate USD250 million bond offering it sold earlier this month into a floating-rate obligation.

BNP Paribas and Barclays Capital say the medium-term swap rate is overvalued and recommend investors take long and short exposure to take advantage. BNP is pitching a butterfly trade, in which an investor sells swaptions in the middle portion of the curve and then does the opposite in the outer ends, or wings, of the curve. Barclays is also recommending a butterfly trade, specifically one executed with a straddle structure.

JPMorgan is planning to start trading and marketing interest rate and foreign exchange derivatives in mainland China. The firm will be one of the first U.S. bulge brackets to enter the market and is making the jump because it expects the most populous country in the world to be an end user haven once legalities, such as derivatives documentation and its status in the legal system, are clarified. "We need to prepare for this market now... China will become a big market," said Chester Kam, managing director and head of emerging Asia rates markets in Singapore.

KBC Asset Management has entered an equity swap for a new capital guaranteed product that is being launched this month. The fund, called KBC Click Europe Reverse 3, has a maturity of two years and three months, said Lode Roose, product development manager in Brussels. Investors have a maximum payoff of 60% of the value of the fund, but the payoff is diminished at the same rate of monthly decreases in the Dow Jones EURO STOXX 50 Index.

Lehman Brothers has hired Daniel Salva, associate director in foreign exchange advisory at UBS Warburg in London, to head fx sales to Spain and Portugal. This is a newly-created position in the development of the firm's European fx products, according to Jessica Shepherd-Smith, spokeswoman in London. Salva will start at the end of September and report to Mark De Gennaro, global head of fx sales.

Nomura International has hired Riz Liao, director of distribution at Westdeutsche Landesbank in Hong Kong, in a new role in its credit sales group. Gordon Mori, head of credit sales in Hong Kong, said, "We're still expanding the business while a number of other firms are still contracting." He continued that Liao will handle marketing for interest-rate and credit derivatives for non-Japan Asia, noting that additional hires are likely.

Kinder Morgan Energy Partners, an energy pipeline holding company with roughly USD2.7 billion in revenue last year, has entered several interest-rate swaps on the back of two bond offerings. The company used the swaps to convert the entire USD625 million it sold through a five and a 31-year bond into synthetic floating-rate obligations, according to an official in the treasury department in Houston.

Precept Asset Management has rolled out its first hedge fund, a fixed-income arbitrage fund. Managed by founders David Sukoff and Chris Danielian, the fund looks for inconsistencies in the pricing of global government bonds and derivatives. The fund dubbed, The Precept Master Fund is a global fixed-income arbitrage fund with both a domestic and offshore entity. The Boca Raton, Fla.-based firm is planning to relocate to New York sometime next year and at that time will be looking to add senior analysts and traders, Sukoff said.

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