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The cost of 10-year sovereign Japan default protection surged roughly seven basis points wider to 60bps last week on the back of a string of downgrades by Moody's Investors Service and a subsequent flurry of trading activity. Among the more active players last week, Goldman Sachs turned heads after reportedly snapping up USD50 million in Japanese sovereign default swap protection, a transaction that is approximately five times the average size of a single trade. "You don't have to buy that much of Japan to make it move," said a trader in London. Another in Tokyo added that daily volume for the 10-year doubled to roughly USD100 million per day Tuesday and Wednesday.

Kansai Electric Power Co. and Kyushu Electric Power Co. are separately considering entering their first weather derivatives contracts to hedge against a cold summer reducing the revenue they generate from powering air conditioning units, according to officials familiar with the companies' plans.

HypoVereinsbank has structured an innovative EUR1.6 billion (USD1.4 billion) synthetic collateralized loan obligation that offers investors exposure to medium-sized German corporates, according to an official at the bank in Munich. The deal contains a static pool of loans, differentiating it from the only other securitization Hypo has done under the Promise banner with German state-owned bank KFW. That deal, as well as all the other Promise deals KFW has been part of in the last two years, had revolving pools of loans. The official said the static pool was used for economic reasons but declined to quantify any cost benefit.

Macquarie Bank plans to structure synthetic securitizations referenced to portfolios of asset-backed securities for its clients' portfolios. The move comes as the firm is set to price its first deal on behalf of its subsidiary Macquarie Leasing. Robert Harris, division director of treasury and commodities in Sydney, said the firm is speaking to clients in Australia, primarily financial institutions about structuring synthetic securitizations where the risks of the underlying assets, such as receivables, are transferred from the balance sheet using credit derivatives to free capital.

Moody's Investors Service has reorganized its structured finance group in New York by promoting one senior analyst to a managing director and delineating the teams covering the collateralized debt obligations market, according to Lisa Tibbitts, spokeswoman in New York. She added that the plan has been prompted by the rapidly growing CDO market. Bill May, a senior analyst, was promoted to managing director of the rating agency's derivatives team.

Salomon Smith Barney has merged its credit derivatives structuring team in New York with its trading operation, according to a former employee. The team, known for its much-publicized Yosemite product that was used by Enron to reduce its credit risk on balance sheet transactions, has been disbanded and absorbed by Salomon's existing credit derivatives trading group. Firm spokesman Dan Noonan downplayed the change, saying it was a minor internal move. He said the structuring and trading groups we're merged as a way to streamline the firm's focus. However, the former staffer said the move has surprised many of the structures, who were taken aback by the merger and are now uncertain of their new roles at the firm and the future vision of the structuring group.

Robert Machin, marketer for derivatives to U.K. financial institutions at Gen Re Securities, has joined Merrill Lynch as a director in the flow interest-rate marketing team in London. He reports to Reuben Barrett, head of flow interest-rate derivative marketing.

Finance houses in Australia have been making changes to their internal arrangements because of new regulations, which came into effect March 11. It is quite clear that these changes will create uncertainty and discomfort, and there will be a period of settling-in. When the industry looks back on the changes, the adjustment and readjustment, particularly to over-the-counter derivative transactions, the hope is that the end result will be better than the previous law.

Tokyo-Mitsubishi International is considering structuring a synthetic collateralized loan obligation to free up capital that would otherwise be committed to its parent's USD500 billion loan portfolio. Naoto Hirota, managing director and head of financial derivatives and securitization in London, said it depends on the financial health of its parent Bank of Tokyo-Mitsubishi after Japanese year-end, which occurs at the end of the month. But he predicts the bank will want to improve its capital position in light of recent downgrades and the potential of more to come.

UBS Warburg has hired Grant Lovett, head of credit derivatives at Barclays Capital in London, and Jerry Wong, synthetic collateralized debt obligation structurer at Schroder Salomon Smith Barney in London, in senior credit positions. Lovett will be a senior trader responsible for growing the credit-default swap and convertible bond arbitrage businesses and Wong will by a senior credit derivatives structurer. Both will report to Sal Naro, global head of credit derivatives in Stamford, Conn. Naro confirmed the hires but declined further comment.

Cavanaugh Capital Management is looking to swap 13% of its portfolio, or $43 million, out of government securities and into mortgage-backed securities, corporates and taxable municipals. Jim Dugan, manager of a $334 million taxable fixed-income portfolio, says the firm wants to pick up additional yield as the economy gains steam. Dugan planned to begin the trades last week, and continue over the next two weeks. He says Cavanaugh will look to sell seven- to 10-year maturities to buy in the three- to five-year range because the steepness of the curve at the short-end will allow him to gain additional yield while reducing duration risk. He says he is not waiting for further signs of economic stability to make the trade, but only to find the product he is looking for.