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Credit-default swap spreads on Swedish and Swiss engineering concern ABB reversed course last week, tightening 250 basis points after a 300bps blowout the previous week. The news that Barclays Bank, Citigroup and Credit Suisse First Boston had agreed to fully underwrite its revised USD3 billion loan helped to comfort investors, who have been concerned over Moody's Investors Service recent downgrade of the company and its lack of access to the commercial paper market, traders said. Mid-market five-year protection on ABB was at 750bp early in the week and tightened to 375bp/500bp by Wednesday. Sellers of credit protection included bondholders and proprietary traders, according to credit derivatives professionals.

BMO Nesbitt Burns is considering establishing an equity derivatives presence in Europe and possibly Asia, depending on the success of its newly created U.S. equity derivatives proprietary trading operation in New York. Patrick Cronin, executive managing director and co-head of equity derivatives, told DW the firm is expanding because its Toronto-based client and proprietary equity derivatives group has generated positive returns on a consistent basis and it is ready to look at new markets. "We have solidified our position in our home market," he added.

CDC Ixis Capital Markets has hired Christophe Thomas, a convertible arbitrage trader at Barclays Capital in London, in a similar position in New York. The firm made the hire because it is set to launch a fund within the next two months, according to a firm official. Thomas will join Quincy Evans, a convertible arbitrage trader who joined the firm in February from Goldman Sachs (DW, 4/3).

The Korean government approved a long-awaited amendment to the presidential decree to the Securities and Exchange Act in February, which will permit certain qualified securities companies in Korea to enter the over-the-counter derivatives business, starting from this July. Although KOSPI (an index for Korean companies) index futures and options and certain currency and other futures products have been traded on the Korea Stock Exchange and the Korea Futures Exchange for years, OTC derivatives have been off limits to securities companies in Korea, except in very limited circumstances. This is in sharp contrast to the treatment of commercial banks in Korea that have engaged in various OTC derivatives transactions. Foreign securities and commercial banks with a large capital base and expertise in foreign currency related products also have been active in this business, although they were subject to foreign exchange regulatory approvals or reports. Such favorable treatment of commercial banks and foreign companies over domestic securities companies has been a source of complaint. By opening up this market to securities companies, such criticism will be lessened. In addition, the Korean government hopes that the competitiveness and profitability of securities companies is enhanced and their customers better served in their financing and risk management needs.

Bob Henderson, head of weather derivatives research at Element Re Capital Products, has left the firm and returned to JPMorgan. Henderson rejoined the firm in New York two weeks ago as v.p. focusing on market risk in equity derivatives, program trading and convertible bond and risk arbitrage. He was the global head of foreign exchange derivatives research prior to joining Element Re, according to a market official.

Dresdner Kleinwort Wasserstein is structuring a USD1 billion synthetic collateralized debt obligation, according to Saad Zein, head of the firm's structured product group in New York. The deal, which is expected to hit the market by early next month, will be referenced to Dresdner's loan portfolio and will include mid and large-cap corporate exposures, said a market official.

Rhicon Currency Management, a foreign exchange fund manager with operations in Singapore, Geneva and Toronto, is considering purchasing euro calls/dollar puts as it expects the pair to break out of its range in the coming weeks. "This is on our radar screen," said Christopher Brandon, managing director in Singapore. "I anticipate a breakout that will be quite violent," added Brandon, predicting the currency pairing will make a technical break past USD0.8860 to USD0.92 within the next few weeks. Spot was at USD0.8765 last Monday.

Fin.Eco Investimenti SGR, an Italian asset manager with EUR10 billion (EUR8.8 billion) under management, is planning to launch a series of hedge funds and may also offer hedge fund-linked products that will use over-the-counter derivatives. The hedge funds will use both fixed income and equity related products, according to an official at the firm. It plans to launch the funds in the fourth quarter and expects to raise EUR200 million in investments.

John Deere Capital is considering entering an interest-rate swap to convert a 10-year USD1.5 billion fixed-rate bond it issued in mid-March into a synthetic floating-rate liability, according to Greg Derrick, a representative in the company's investor relations department. The company opted not to enter a swap at the same time as the bond sale because it wanted to see if rates would go up. It does not think rates will rise in the near term, so is now looking at entering the swap. With three-month LIBOR hovering around 2%, the company would look to pay a floating rate that was no more than 300-350 basis points above LIBOR before entering a swap. The finance arm of the Moline, Ill.-based producer of construction and forestry equipment, would look to enter a swap in which it receives a fixed rate equal to the 7% coupon of the bond and pays a floating rate. The maturity on the swap would equal the 10-year maturity on the bond offering. JP Morgan and Salomon Smith Barney co-managed the bond offering.

Shinichi Minohara, managing director and head of Japanese credit derivatives at Merrill Lynch in Tokyo, has resigned in a move that rival traders described as a big loss for Merrill. "He's one of the top Japanese credit derivatives traders in the market," according to one rival. Peter Walshe, head of credit trading for the Pacific Rim, said, "He had been at the firm for eight years and has made major contributions for derivatives." Minohara has worked in credit, interest-rate and foreign exchange derivatives.

In a quiet options market after the holiday weekend, one-month euro/dollar implied volatility spiked to 8.2% from 7.5% Tuesday before falling back to 7.8% by Wednesday afternoon. Traders said the dollar weakened against major currencies across the board as option buyers were looking for a safe haven due to uncertainty caused by tension in the Middle East. Common trades saw investors looking to buy euro calls/dollar puts with strikes between USD0.88-0.93. Spot was trading around USD0.87 when the option went through.

Bill Levy, managing director and head of hedge fund sales for the equity derivatives group at Morgan Stanley, has jumped ship to join Lehman Brothers, according to officials at both firms. The move is seen as a boost to Lehman's flow derivatives business and elevates the firm's presence in the hedge fund market, according to two market officials. David Gittings, head of the global equity derivatives marketing group at Lehman, will now co-head the group with Levy. Both co-heads report to John Wickham, global head of equity sales at Lehman. Levy could not be reached and Gittings and Wickham did not return calls. Bill Ahearn, a Lehman spokesman, also did not return calls.