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SNCF, the French rail operator, has entered a cross-currency interest-rate swap on the back of the GBP350 million (USD498 million) bond it sold earlier this month, according to Christine Hemat, treasurer in Paris. SNCF converted the entire proceeds of the deal in the swap, which also matches the 25-year tenor of the bond offering. Hemat said the company issued in sterling because it affords longer maturities than the euro market, which is not deep enough and does not extend beyond 15 years.

Merrill Lynch plans to bulk up its foreign exchange desk in Tokyo on the back of its global effort to become a more significant force in foreign exchange products, according to market officials. As part of the plan it is setting up a short-term interest-rate trading group and hiredEddie Takata, v.p. of interest rates at Dresdner Kleinwort Wasserstein, as a director on the desk, according to Takata. He is due to start in April. Takata declined to elaborate.

Five-year credit protection on Weyerhaeuser tightened 20 basis points after the company's USD5.5 billion bond issue was oversubscribed Wednesday. It was the largest corporate bond offering this year and resulted in spreads moving in from 130bps on Wednesday morning to about 110bps by the market close. Spreads on the Tacoma, Wash.-based company were at 125bps a week prior to the bond offering.

Standard & Poor's has reorganized its structured products division in New York to create three new groups. The division, which until about two weeks ago had several different teams covering the cash flow product market, market value CDO products and synthetic collateralized debt obligations and derivatives, has been reorganized into three distinct groups. These are fixed income, equity and an operating vehicle group, according to Richard Gugliada, head of the global CDO group in New York. The three new groups report to Gugliada.

Salomon Smith Barney has set up an institutional equity derivatives sales group in Asia and has hired Emanuel Breiter, v.p. of equity global markets at Merrill Lynch in Hong Kong. Breiter starts in the new position as director of institutional equity derivatives sales at Salomon in Hong Kong at the end of the month, according to Katherine D'Arcy, spokeswoman in Hong Kong. She attributed the effort to improved market conditions in Asia: "We see an opportunity now that we didn't see a year ago," referring to the pick up in Asian cash equities. Breiter is travelling and could not be reached for comment.

Investor, a Swedish industrial holding company with approximately SEK130 billion (USD13 billion) in assets, has entered a foreign exchange swap to convert the proceeds from a EUR500 million (USD435 million) bond it sold late last month into Swedish krona. A treasury official at the company in Stockholm said it converted the deal into its local currency because it maintains all of its debt in the Swedish currency, but chose to issue in euros because it wanted to extend its maturity curve and would not be able to raise that much long-term money in the Swedish market.

The growth of the credit derivatives market has created new relative value opportunities for credit investors. One such opportunity is trading the default swap basis in which investors may take a relative value view on the spread between a bond issued by some entity, and the spread demanded by a default swap contract linked to that same entity. While there is a theoretical relationship between these two spreads, there are a number of factors that may cause this relationship to break down which have been described in a previous Learning Curve (DW, 12/17). In certain cases this can present clear investment opportunities to investors.

Westpac Banking Corp. is planning to issue its first synthetic collateralized debt obligation in Asia. The CDO will likely be referenced to a USD1 billion pool of Australian, New Zealand, European and Asian credits, said Nick Fyffe, global head of structured product sales in Sydney.

ABN AMRO has launched a series of structured notes in Australia, which are thought to be the first of their kind in the Aussie market, noted Aaron Stambulich, equity derivatives sales and trading in Sydney. "With reverse convertibles, there's always a guaranteed coupon. To enhance the yield, we've taken out the downside protection," said Stambulich.

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