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Energy traders are turning to the derivatives market to hedge against the risk of counterparties going bust, driving them to consider everything from credit-default swaps to equity puts on counterparties' stock, according to DW sister publication Power Finance & Risk. "In the past we relied on corporate guarantees. What we are looking at [now] is derivatives," said Frank Hilton, chief credit officer at American Electric Power, on his company's approach to dealing with potential defaults. PG&E National Energy Group has also been active in tapping Wall Street dealers on default protection prices, according to Bachar Samawi, v.p. of trading, though he said the cost of protection is holding back many trades. Both were speaking at the Current Challenges in Energy Trading conference in Houston last week.

The cost of U.S. dollar/euro options shot higher last week after WorldCom's revelation that it hid nearly USD4 billion in expenses fueled fears it may have to file for Chapter 11 bankruptcy protection and sparked a sharp decline in the U.S. equity markets. Mid-market one-month implied volatility rocketed to 13% by Wednesday afternoon in New York from 11.5% at the start of the week, according to traders. "WorldCom has made stocks collapse and has had an adverse effect on the dollar, it's purely that simple," said one trader in New York. He added that more than a yard of one-month euro calls/dollar puts struck at USD1.02 had gone through the market via several banks which he declined to name. Spot was USD0.9850 Wednesday afternoon, down from USD0.9945 earlier in the day. "Parity is a foregone conclusion, it's only a matter of whether it happens next week or next month. Or this week," a trader said. WorldCom's news also pushed 25-delta risk reversals in favor of euro calls to 1.5 vol from 0.9 vol earlier in the week.

Although we get droughts, floods, fire, cyclones, snow and ice, economic adversity is not restricted to disaster conditions. A mild winter can ruin the earnings of ski resorts, dry weather can reduce crop yields, and rain can shut-down the entertainment and construction industries. Weather risk is one of the biggest uncertainties facing businesses.

General Property Trust (GPT) and Bank of Scotland International (Australia) launched new transactions this week, as investor demand for new names continued. GPT was first to market, launching a A$250m three year issue via National Australia Bank (NAB) on Monday. Despite the fact that property trust issuers have been some of the most prolific borrowers in recent months, the quiet primary market meant GPT was able to attract sturdy support.

PT Indofood Sukses Makmur is putting the final touches on its $200m five year deal, to add to the recent spate of Indonesian corporate issuance. The transaction is Indofood's debut in the dollar bond market as well as the largest issue from the country since the Asian financial crisis. Credit Suisse First Boston (CSFB) is sole bookrunner for the issue. Pricing is expected in mid-June, following a roadshow, which starts today (Friday).

Malayan Banking rode a tidal wave of investor demand this week to price and increase its $380m 10 year non-call five lower tier two subordinated bond. Joint lead managers Deutsche Bank and JP Morgan generated an order book of just under $1bn, on the back of which Maybank decided to increase the $300m deal.

A trio of convertible deals emerged this week as Mitsubishi Corp and Nikon sold Euroyen CBs and Orix Corp raised $350m through the proprietary Merrill Lynch LYONS structure. There was little doubt that Morgan Stanley hit the market on the button with its ¥50bn CB for Nikon. The issue was priced at the close of trading on Monday London time and by yesterday (Thursday) was quoted at 109%, well above its 100% issue price.

Goldman Sachs and Nomura have begun the process of selling the entire 12.7% stake of 500,000 shares in JR East, the country's largest railway group, held by government owned Japan Railway Construction Corporation (JRCC). The deal could raise up to ¥300bn and will be the first state selldown this year. The government announced on Wednesday that bookbuilding will start on June 10, with the final price to be set between June 14 and June 19. Pre-marketing of the deal began yesterday (Thursday) amid improving sentiment towards Japan and a bouyant Tokyo bourse.

Hong Kong The Hong Kong Mortgage Corp (HKMC) is considering increasing its HK$1bn multi-tenor retail targeted issue to HK$5bn due to strong investor demand. If the transaction is increased, it would mark the joint biggest Hong Kong dollar issue ever, equal in size to HKMC's own HK$5bn five year deal last year.

By the middle of this week, US dollar swap spreads had compressed to around 41bp at five years and 47.5bp at 10 years. These prices were 2bp or so tighter than at the end of last week. At the end of trading yesterday (Thursday), spreads had found something of a supporting bid and closed at 49.5bp at 10 years and 44bp at five years. Dealers cited Goldman Sachs as having been a big payer at 10 years earlier in the day and there was also some asset swap business.

China Morgan Stanley on Tuesday completed a $90m convertible for China's largest noodle manufacturer, Tingyi Holdings.

Commonwealth Bank of Australia (CBA) has taken aim at the Asian investor base for the first time with the launch of its $500m public five year floating rate note (FRN) issue this week. Goldman Sachs and Nomura were joint lead managers for the senior debt transaction, which was roadshowed in Beijing, Shanghai, Hong Kong and Singapore.