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Prudential Life Insurance's Taipei branch is considering upping its use of credit-linked notes by year-end for its TWD4.5 billion (USD132 million) domestic fixed-income portfolio. Vincent Wen, portfolio director in Tapei, said the insurer will invest in two or three investment-grade notes by year-end if the yield is attractive. Wen continued that the insurer invested in four credit-linked notes earlier this year, though the majority of its portfolio is invested in domestic and foreign bonds. For credit-linked notes, the insurer prefers dollar-denominated structures on global names that it does not have access to in the bond market. The typical size is around USD2 million per note.

Falconbridge, a low-cost metals producer with CAD2.61 billion (USD1.69 billion) in revenues, has entered three interest-rate swap agreements to convert a fixed-rate obligation into a floating-rate liability, according to Dean Chambers, treasurer. The rate swaps come on the back of a USD250 million fixed-rate bond the company recently sold. "We have a bias toward floating because it is generally the lowest cost of funds," he said. Also, he said the cash was raised to pay down a floating-rate commercial paper obligation so it made sense to replace that with another floating-rate obligation that could be created via swaps.

Kairos Alternative Investments plans to launch the first long/short equity hedge fund in Italy in the coming weeks. The fund will use equity derivatives to short stocks, according to Alberto Altieri, senior analyst in Milan. He said the asset manager is waiting on approval from the Banca d'Italia, which it expects in the coming weeks, and will then launch the fund with EUR40 million (USD37.8 million) of capital.

Salomon Smith Barney has hired James Berkeley, credit derivatives salesman at Merrill, for its distribution effort in New York. Berkeley confirmed he had made the move and is looking forward to the new opportunity. He referred further queries to his new boss Mark Miller, head of corporate sales including credit derivatives. Miller did not return calls.

Siemens Financial Services, a financing subsidiary of Siemens, is considering joining a handful of corporates that sell--as well as buy--credit protection on high-grade names as an investment tool. The company already buys protection referenced to its receivables portfolio, said Ralf Lierow, director of portfolio management for the European equipment and sales financing department of SFS in Munich. He added it has not yet sold protection because the equipment and sales department does not have a banking license and will not consider applying for one because the expected volume of business would not justify it. However, it is currently reviewing other areas of Siemens through which it could sell the protection, he said, declined further comment on this point. Once it has established how it can become a protection seller, Lierow said he will present the idea to the board for internal approval. The entire process could take several months.

Last week's Learning Curve dealt with new legislation and supervisory regulations and directives, while this week's will look at judicial decisions, tax and accounting.

The cost of U.S. dollar/euro options continued to climb higher last week as the greenback hit a 17-month low against the European currency. Implied volatility rose to 10.15% Wednesday from 9.75% at the start of the week. "It's not screaming up by any means, but [vol] is steadily going up as the dollar gets weaker," said one trader. As a result, and as continued weakness in the U.S. equity markets indicates, the trend will continue for the foreseeable future. Spot was USD0.955 Wednesday. A common trade was for investors to buy six-month and one-year euro calls struck at parity. "People are hedging themselves on the back end in case the euro goes beyond that," noted one trader. That helped push 25-delta risk reversals 25% higher from 0.8 vol to one vol. "Everyone expects there will be a manageable appreciation of the euro for the time being," he said.

UBS Warburg last week brought aboard Laurent Combalot, head of sales at Indosuez W.I. Carr Securities in Hong Kong, in a new role as executive director in the equity risk management group in Hong Kong covering Asia ex-Japan. Combalot said he will handle equity derivative sales and structuring for institutional clients in the region. "I'll be offering a wide range of products," noted Combalot. The firm will market such products as equity-linked notes, capital guaranteed products and index-swaps.

UBS Warburg has hired two marketers to sell structured credit and interest-rate derivatives products to the insurance sector, said Michael Ice, managing director and head of North American structured marketing and sales within the interest-rate/foreign exchange group in Stamford, Conn. The firm also plans to hire an associate for the group. Glenn Taitz joins from Merrill Lynch as executive director of structured products and will market interest-rate and credit products to life insurance and property and casualty companies. And Wim Ludington, also an executive director, comes via JPMorgan and will focus on selling structured credit products to reinsurance companies. The two form the insurance sales group for interest-rate and structured products. Both report to Ice, who said the hires do not reflect a new effort as "[selling to] insurance companies can't be a new initiative," but he noted they do mark an increased emphasis on the sector.

WestLB has hired four credit derivatives professionals from Commerzbank Capital Markets in New York, according to Commerzbank officials. The four--Peter Tchir, Joe Carroll, Vitali Fiks and Ed D'Allesandro--formed the core of Commerzbank's credit derivatives operation in New York. Tchir headed up the structuring effort which included Carroll and Fiks. D'Allesandro was a flow trader.

"There will not be a trading book. There will be no Enrons here."--Ralf Lierow, director of portfolio management for the European equipment and sales financing department at Siemens Financial Services in Munich, commenting on the company's plans to sell credit protection. Click here for complete story.

"WorldCom is AARRRRRGGHHHH".... It was tough getting info Friday morning, as some desks tuned into the World Cup match between the U.S. and Germany. One trader answered his phone and started to answer a question when he abruptly joined in a frustrated, anguished scream that went across his trading floor as a U.S. chance turned into a near miss.