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Prices for credit protection on Malaysia have fallen and volumes rocketed after Standard & Poor's upgraded the sovereign. Malaysian credit protection traded five to six times around the announcement on Tuesday, in comparison to a typical week where Malaysia trades about once a day. "Quite a number of trades went through," added a trader at Salomon Smith Barney.

Derivatives houses, including Deutsche Bank, UBS Warburg and JPMorgan, have seen demand for hybrid structured notes in Singapore increase by approximately 30% as end users look to pick up enhanced yield before year-end. Bryan Yap, Asian head of interest-rate swaps at Deutsche Bank in the Lion City, said "This is a new development in Singapore." On average about 10 to 15 notes are structured per month, said one marketer.

Five-year credit-default swap spreads on energy giant El Paso Corp. tightened more than 200 basis points last week as positive news emerged out of the embattled energy sector. Protection on El Paso narrowed to 750-850 basis points Wednesday from 1,050bps Monday, according to traders. "El Paso has revised some of its financing, so its liquidity has improved and there's some positive sentiment coming out of the sector as a whole," said one New York trader.

Deutsche Bank plans to make a push into the U.S. equity derivatives structured products market in the coming months. The European derivatives giant does not currently have a structured products desk in the U.S., but has offered some of these products from other areas, such as the prime brokerage desk. The firm has hired former Bankers Trust equity derivatives marketer Michael Chun to spearhead the operation. Karen Fang, v.p. in the structured products division in London, is also moving across the pond to work in the division, according to Johan Groothaert, managing director and head of equity structured products and alternative investments in London.

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.