Search results for

Credit derivatives practitioners will likely add forwards on credit-default swaps to their product list early next year, according to Paul Lewitt, global head of credit flow trading at Dresdner Kleinwort Wasserstein in London. This will enable derivatives houses to hedge maturity mismatches in their portfolios.

Derivatives houses, including Citigroup, Barclays Capital and Deutsche Bank, are pitching receiver trades that take advantage of the steep euro yield curve between the three-month and the four-year portion. Many hedge fund accounts have already taken advantage of this steep curve and have scooped up such trades as two year into two year receiver options, in which the investor enters an option to receive two-year fixed and pays floating, said Jean Dumas, head of European relative value research at Deutsche Bank in London.

General Electric Capital Corp., the financial services arm of General Electric, has entered an interest rate swap to convert part of a recent USD2 billion fixed-rate note sale into a synthetic floating-rate liability. Peter Stack, spokesman in Fairfield, Conn., said the corporate periodically enters interest rate swaps to maintain a match between its fixed- and floating-rate assets and liabilities. He declined to specify what portion of the five-year note sale constituted the exchange, or what rate the electric giant paid or received.

Bank Nederlandse Gemeenten, a Dutch public sector finance agency, has entered swaps on two recent bond deals to convert them into euro-denominated floating rate liabilities. The agency entered a cross-currency interest rate swap on a CHF300 million (USD228.52 million) bond and an interest rate swap on a EUR150 million (USD173 million) issue. Bianca Ydema, senior manager in capital markets in the Haag, Netherlands, said it is the agency's policy to convert fixed-rate issues into floating-rate liabilities and any foreign currency into euros, its domestic currency. Interest rate risk is managed separately, Ydema explained.

Credit-default swaps referenced to Hong Kong's Hutchison Whampoa widened last week on the back of a surprise announcement that it was re-tapping the debt market. Sonia Lee, v.p. and Asian credit trader at Credit Lyonnais said last Tuesday five-year credit protection widened to 160-170 basis points from 140-150bps on the back of the news. Volumes in Hutchison protection doubled to a total of USD50 million (notional) a day.

Some 50 credit derivatives professionals met at London's Jury's hotel last week for IBC's credit derivatives conference, Jeremy Carter, managing editor, reports.

Barclays Capital has lost Stephen Hancock, commodity derivatives marketer in London. An individual familiar with the group said Hancock left to pursue other interests outside of banking and commodities. Orrin Middleton, head of European commodity derivatives marketing in London, referred calls to Michelle Cook, spokeswoman in London, who declined comment. Hancock could not be reached.

CDO managers are turning to new types of asset-backed securities as reference entities for synthetic deals, according to panelists from Fitch Ratings. Jill Zelter, managing director, said new reference entities include residential mortgages, credit cards, agricultural loans and aircraft loans and leases.

Indosuez W.I. Carr Securities, a subsidiary of France's Crédit Agricole Indosuez, is relocating its equity derivatives trading desk to Tokyo from Hong Kong. The firm had originally planned to make the move in late summer, but has decided to up sticks in the coming weeks due to the outbreak of SARS in Hong Kong, according to a firm official.

Merrill Lynch has transferred two New York-based collateralized debt obligation structurers, Ken Margolis and Scott Bohner, into sales roles, and is sending Bohner to its San Francisco office. Doug Mallach, co-head of credit sales in New York, to whom the sales pros report, said the transfers were made "in response to explosive demand for dedicated structured credit sales expertise."

Nomura International plans to start taking basis risk in its credit derivatives book through buying protection with one set of documentation and hedging it with a contract with different documentation. Mark Crawley, credit derivatives structurer in London, said the most likely trades will be to buy credit protection without the restructuring credit event from clients and sell protection in the inter-dealer broker market using standard documentation, including the restructuring credit event.

The debate over the definition of restructuring as a credit event refuses to lie down even though the proposed International Swaps and Derivatives Association 2003 definitions allow for three different types. "The debate comes down to whether this a death contract or a deterioration contract," according to Mark Timmis, director and head of credit derivatives trading at Credit Suisse First Boston in London.