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Volkswagen Leasing GmbH this week launched its fourth securitisation of German car leases in an oversubscribed deal worth Eu750m. Lead managed by Credit Suisse First Boston and Deutsche Bank, Volkswagen Car Lease No 4 Ltd offered two sequentially amortising passthrough tranches, with legal maturities of March and July 2004.

Bank of Scotland (BoS) this week launched its second securitisation of UK residential mortgages, using the innovative master trust structure it unveiled in April 2000. Bookrunner Schroder Salomon Smith Barney once again took advantage of the master trust's power to carve cashflows into investor friendly chunks by launching soft bullet tranches with short legal maturities.

Barclays Bank is believed to have launched a highly unusual yen denominated collateralised bond obligation, backed by a pool of mostly US asset backed securities. The ¥17.25bn ($147m) deal is a fully funded synthetic CBO. Lead manager Barclays Capital declined to comment, but the deal appears to satisfy two objectives. Assuming all the notes are sold to third parties, Barclays will reduce its exposure to the assets to 3% of their face value, and may be able to earn an attractive spread on that equity risk.

Altgate Capital is launching its first five hedge funds and plans to have another five out by the end of the first quarter. The firm opened its doors last year (DW, 10/30). The funds will employ strategies including long/short, merger arbitrage, event-driven, distressed debt and emerging market styles, said James Baker, chairman and a 25-year Goldman Sachs veteran. The funds, will be offered through third-party distribution channels including private banks and financial advisors and will carry standard fees of 1% management/20% performance. Total costs after factoring in those of the distributor will be around 2% management and 25% incentive, Baker said. Private client minimums will be $1 million for investment. The funds will be targeted toward small and medium-sized institutions and high-net-worth individuals. Altgate is presently looking for distribution channels. "We already have five hedge funds lined up for clients....Five will probably not be enough. By the end of the first quarter we will be offering at least 10," Baker said.

A bank in Tokyo bought some USD1 billion in three-month euro calls against the Japanese yen Wednesday, struck at JPY115, according to traders there. Three-month implied volatility on the pair jumped from 15.4%/15.9% Wednesday, to 16.2%/16.7% Friday, a trader said. On Friday the spot stood at JPY112.80, compared with around JPY109 Wednesday, he added. A number of smaller lottery-ticket style positions also traded through the week in U.S. dollar/Japanese yen options, with traders buying deep out-of-the-money dollar calls/yen puts. Traders bought one-year yen puts struck at JPY150, and three-month yen puts struck at JPY125. Such puts are attractive because while they are cheap, if they move into the money they bring potentially massive earnings, one trader said. The dollar traded at about JPY118 Friday.

Barclays Capital is looking at becoming a market maker in over-the-counter weather and power derivatives. Benoit de Vitry, managing director and global head of commodities in London, said the bank is "looking at [adding the products] very seriously as an integral part of a global energy desk." He expects the bank to reach a decision on weather derivatives by the summer. He declined all further comment on power derivatives. Barclays Capital's commodities group will decide whether to introduce weather products, de Vitry noted, adding that the decision will hinge on the level of liquidity and demand from existing customers. If it enters the market it will start by offering weather derivatives to its existing customers across the globe and then attempt to add new clients as it builds a reputation in the products.

December 11, 2000 at 8:00 a.m. (New York Time) 32 Old Slip, Conference Room 23, New York and Peterborough Court, 133 Fleet Street, 10th Floor, London

Commerz Securities last week launched a fixed-income derivatives trading book in Tokyo. It has been preparing the move for some time (DW, 5/22), but has waited for the opportune moment to pull the trigger. With Japanese equity markets performing badly, there are now greater profit opportunities for retail products with embedded fixed-income and credit derivatives, said Philippe Avril, business manager in Tokyo. Also, Japanese yen interest-rate volatility has started to pick up in the last few weeks, he said. Commerz plans to market to clients structured products such as callable bonds and credit-linked notes, and to a lesser extent plain-vanilla interest-rate swaps. Swaps will be less of a client focus—that market is dominated by Japanese banks and with business so competitive, margins are wafer thin, Avril said.

Five-year credit default swap spreads on DaimlerChrysler blew out last week to 160 basis points as the market waited for a multi-tranche bond from the auto manufacturer to be priced. The market had been nervous that the company would not be able to sell the bond at all, which would signal that the company could be in dire straits as it could not fund itself. But the car company successfully sold USD1 billion of five-year debt, USD1.5 billion of ten-year debt, USD1.5 billion of 30-year debt, EUR2.75 billion (USD2.58 billion) of three-year and GBP350 million (USD521 million) of six-year debt. Richard Gillingham, head of credit derivatives at Bank Gesellschaft Berlin, said on Tuesday the price for protection fell off its 160bps peak as investors started selling protection on the name because prices looked comparatively rich—although auto names had widened, most were not as wide as DaimlerChrysler. By Thursday, as DW was going to press, five-year default swaps on the name were trading at 145bps. The typical notional sizes were between USD10-20 million.

DBS Bank, Singapore's largest local bank, is rapidly building its treasury operations with more than 10 new hires expected over the next two weeks, many of them derivatives professionals from J.P. Morgan Chase. DBS has within the last year or so set up foreign exchange, interest-rate, equity and credit derivatives teams (DW, 11/29/99), in a bid to become a regional player. Water Cheung, managing director and head of derivatives, treasury and markets in Singapore, said regulatory changes by the Monetary Authority of Singapore last month allowing interbank trading of Singapore dollar/U.S. dollar options look set to boost that market considerably, making now a good time to hire. DBS is also considering hiring derivatives marketers in Thailand, and has hired several professionals in Hong Kong over the past three months, he said. He declined to elaborate. Peck Kwan Yip, institutional foreign exchange sales professional at Chase, joined as an institutional foreign exchange derivatives sales professional late last month, according to an official at DBS in Singapore. A further two hires in the foreign exchange derivatives team are also imminent.

General Re Securities is planning to target the institutional investor market for the first time and plans to offer insurance derivatives, structured credit products and guaranteed funds by the end of the first quarter. The move represents a volte-face for the former General Re Financial Products both because it has long targeted derivatives players in the interbank market, and because early last year it was said to be on the verge of being sold (DW, 1/24). It will still market to banks. Kevin Lecocq, global head of marketing and structuring in London, said the boutique has been re-staffing and is using this as an opportunity to pursue this new client base. It is looking at products in which it has expertise and in which it has seen potential client demand.