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JPMorgan has recently seen an uptick in demand for principal protected commodity-based derivatives products for institutional investors, according to David Kitson, head of currency and commodity structuring in London. The firm is marketing these products because investors are seeking alternatives to the equity and credit markets to increase investment returns. JPMorgan began showing these products to investors three months ago, he noted, declining to specify how many deals it has completed.

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Aberdeen Asset Management Co. in Bangkok, with over THB7 billion (USD162 million) under management, is studying using interest rate derivatives for the first time in Thailand. An official in Bangkok said the fund is studying using baht-denominated interest rate swaps or purchasing structured notes such as inverse floaters for its fixed income operation. "We could be using these in the future," explained the official, noting that after the initial studying phase, Aberdeen could use the products within six to 12 months to enhance yield. Interest rate swaps would likely be used on the back of domestic bond positions, explained the official. The fund has recently started eyeing the products and has not contacted any counterparties. The official declined further comment.

Dixons Group is considering making its first foray into the credit derivatives market. Matthew Hurn, European treasurer in Hemel Hempstead, U.K., said the company is reviewing the possibility of buying credit-linked notes for its investment portfolio, which is domiciled in the Isle of Man. This so-called captive portfolio contains the premiums paid by retail consumers for guaranteed warranties on electronics products, according to a corporate treasurer at a U.K. company familiar with Dixons. Giles Newell, group treasurer, however, denied that the company is examining investing in CLNs and declined further comment.

U.S.-based auto part supplier AutoZone has unwound an interest rate swap on a USD115 million three-year unsecured bank loan. An official at the auto chain in Memphis, Tenn., said the firm decided to unwind the swap because it has paid down the loan early, which was due to terminate in December next year. He declined to name the banks with which AutoZone held the loan. The interest rate swap was used to hedge the auto supplier's floating rate exposure, converting the loan into a fixed-rate liability, the official said. He declined to specify the rate or name the swap counterparties.

U.S.-based derivatives professionals are bracing for a lean bonus season, with payments on average expected to be 25-30% down on last year. Even profitable departments, such as credit derivatives, likely will lose out as their bonus pools are raided to subsidize the abysmal performance of equity departments, noted one headhunter. Times are so hard that most firms will be forced to short change employees who have performed well, agreed another New York-based recruiter. In credit derivatives, a director in trading or sales at a tier one bank will be lucky to see much more than USD500,000 this year, versus a bonus of between USD750,000 and USD1 million last year, he added.

The U.S. trade association for financial guarantors filed on Nov. 8 an amicus curiae--or friend of the court--brief asking a U.S. court not to accept an insurance company's defense in an on-going case in which the insurer is charged with failing to pay out on a financial guarantee it had written. The case is being keenly watched by some derivatives lawyers as the judgment could have a profound impact on the credit derivatives market.

Wachovia Securities plans to beef up its U.S.-based credit derivatives operation with several hires in sales, trading and structuring. An official in Charlotte, N.C., said the firm is in talks with candidates and expects to name several new appointments by year-end, with others to be placed early next year. He declined to say how many hires will be made in total.

"A lot of these companies are just waking up."--Scott Wacker, global head of corporate distribution at ABN AMRO in Amsterdam, commenting on the lack of preparedness for a new accounting rule among corporates. For complete story, click here.

The cost of euro/dollar options jumped by around 25 basis points last Wednesday on the week before as the dollar came under renewed pressure in the spot market. Last Wednesday one-month implied volatility stood at 9.25%, having reached 9.5% earlier in the week, while one-year volatility rested at 10.25% having hit 10.5% in the same period, noted a trader in New York. The currency pair traded at USD1.007 last Wednesday in the spot market, having reached USD1.01 last Monday.

Groupama Asset Management is preparing to shift some $15 million out of Treasuries and into corporate bonds in a bid to add yield. Dan Portanova, portfolio manager of $150 million in taxable fixed-income, says he will also look to shift out of consumer non-durables whose stock performance has held up well. Before making the trades, however, Portanova says he would like to see continued improvement in corporate bonds versus Treasuries, improved corporate earnings, tax stimulus in 2004 moved up to 2003 and a more stable picture overseas.