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SBI Funds Management, an Indian fund manager with INR29 billion (USD624.9 million) in assets, is planning to use its first Indian rupee interest-rate swap this quarter ahead of expected interest-rate movements in India. It is looking to use fixed-to-floating interest-rate swaps on its bond portfolio, now that interest rates appear to be on the rise, said P.K. Das, v.p.-debt in Mumbai. Some 99% of SBI's INR17 billion fixed-income portfolio is fixed-rate, he said, noting that there is not a well-developed floating-rate bond market in India. Corporate bonds make up over 75% of the portfolio, while the rest are government bonds, he said. The average maturity on the bonds is just below three years, and the average coupon is 11-11.5%, he added. Currently overnight call rates, the most established floating rate benchmark in India, stand at nearly 10%.

A six-strong group of interest-rate derivatives marketers to financial institutions resigned last week from J.P. Morgan soon after collecting their bonuses, according to officials familiar with the moves. It could not be determined by press time if the moves are related to J.P. Morgan's merger with Chase Manhattan. Several members of the team, which included specialists in marketing interest-rate derivatives to agencies, are believed to be heading for Credit Suisse First Boston. Others may be joining Lehman Brothers, according to a Wall Street rival. A spokesman for J.P. Morgan Chase, a spokeswoman for CSFB, and an official at Lehman declined comment.

A working group for the International Swaps and Derivatives Association met as DW was going to press Friday to discuss creating a new definition of restructuring as a credit event. In a letter to members of the working group, Bob Pickel, director and ceo, explained that the goal of the meeting was to discuss possible principles for a new definition of restructuring.

Italy's Crediop has entered a knock-out interest-rate swap to hedge half its exposure on a fixed rate EUR220 million loan it made two weeks ago. Crediop provides funding for local and municipal entities at fixed rates but secures floating rate financing to fund its lending program, according to Luca Lupori, derivatives trader in Rome. The bank decided to use a knock-out interest-rate swap because it was 10-15 basis points cheaper than a plain-vanilla swap, he said, adding that he believes there is little chance of it being knocked out. The Federal Reserve set the direction for future interest-rate movements with its 100bps rate cut last month, Lupori added.

Michael Peier, head of emerging market foreign exchange and derivatives at Lehman Brothers in Tokyo, resigned last week to take a break from the industry. He has been replaced by Joe Rigby, a swaps and foreign exchange trader at the firm in Tokyo, according to market officials.

Korean insurance companies are eyeing credit derivatives for yield pickup as falling interest rates cut into returns on their floating-rate bond portfolios. Samsung Life Insurance is considering its first use of credit derivatives, while Kyobo Life Insurance is eyeing extending its use. Fund management companies are also expected to increase their use of credit default swaps and credit-linked notes for the same reason, according to Young Hee Kim, head of derivatives marketing at Credit Lyonnais in Seoul.

Implied U.S. dollar/South African rand volatility fell to 13.1%/14.1% on Wednesday from 14.5%/15.5% on Monday. Traders bought at-the-money options at the beginning of the week, ahead of the Federal Reserve interest-rate cut on Wednesday. They anticipated a rate cut spurring short-term volatility in the pair, explained a trader in Johannesburg, and hence wanted to be long gamma. Gamma is the rate of change in the delta of an option relative to an incremental change in the price of the underlying. Trades were typically for one-week maturities, in average notionals of USD15-30 million.

Traders bought one-week Australian dollar calls against the U.S. dollar Wednesday after one-week implied volatility rose by a percentage point in one day to 15%, to bet on an anticipated rise in the Aussie dollar. The rise in vol, in anticipation of Wednesday's 50 basis point interest-rate cut by the U.S. Federal Reserve, was expected to continue, said traders in Sydney and Melbourne. The Reserve Bank of Australia is not expected to cut interest-rates as aggressively when it meets tomorrow. This should help the Aussie dollar appreciate against the greenback, they said.

Market makers were buying euro calls/dollar puts last week in an attempt to cover two euro/dollar options positions that traded last month, estimated at USD2-4 billion (notional). Deutsche Bank and Bank of America reportedly bought the options, and some traders said these positions were on behalf of customers. Traders at Deutsche Bank and BofA declined comment.

Zurich Capital Markets has hired a pair of senior derivatives bankers as part of its effort to establish an over-the-counter powerhouse in Sydney. Stephen Conrad, head of structured trading and derivatives at Macquarie Bank in Sydney joins this week, to be followed by Richard Howes, co-head of agricultural derivatives at Macquarie in Chicago, according to market officials. Both are veterans of Bankers Trust, as are most of the senior capital markets officials at Zurich.

TD Securities is looking to hire two to three U.S. institutional derivatives marketers focusing on structured credit products within the next six months. The bank recently hired Paula Klara, senior v.p.-credit derivatives marketing and structuring at Donaldson, Lufkin & Jenrette in New York, to head up the group, which has two other marketers, said Joe Hegener, managing director, global head of high-yield credit derivatives, collateralized debt obligations, and co-head of loan trading and sales in New York.