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Westdeutsche Landesbank has hired Janaka Withana, interest rate derivatives trader at Merrill Lynch in New York, in a similar role for the German bank's New York office. Withana, who started last month at WestLB, will run the mortgage-backed and asset-backed swaps books. He reports to Sean Tully, head of all rates and derivatives trading for the Americas. Calls to Tully were referred to the firm's press office where Sam Ostrow, a spokesman, declined comment.

The cost of U.S. dollar/euro options rose slightly last week in line with a one-cent move higher in the value of Europe's single currency. Implied volatility for one-month dollar/euro options rose to 10.5%, up from 10.2% to start the week, in what traders described as a holiday-type market with a short week in the U.K. and Labor Day approaching in the U.S. In the current cycle, vol and the euro have moved inversely. The euro appreciated to USD0.98 late Wednesday from USD0.97 Monday. "We've had some weakness in the dollar so that's put a floor on volatility, but no one really wants to buy or sell right now," said one options trader, adding, "it's a stalemate."

BNP Paribas recently issued a JPY160 billion (USD1.35 billion) private synthetic collateralized debt obligation in Japan, with plans to issue another this month. Stephane Delacote, head of credit derivatives in Tokyo, said, "This has become a regular business for us now." He added that the private deal was the sixth CDO for the French bank in Japan. "Now we're working to get number seven out," he said, adding that the next CDO could be out later this month. Delacote said there is still steady demand in Japan.

Credit-default protection on Canadian industrial giant Bombardier widened by roughly 50 basis points last week, after the company's quarterly profits sank by two-thirds from a year earlier. Five-year default-swap spreads widened to 270 basis points Wednesday up from about 220bps earlier in the week, according to traders. The company announced the earnings late Tuesday, sending protection wider Wednesday morning. Protection on subsidiary Bombardier Capital also widened a similar amount to 320bps. Traders said the move wider may have been exacerbated by thin markets last week, following a U.K. holiday and in advance of a U.S. one. "It's a big move for them, but when markets are thin stuff tends to get exaggerated one way or another," said one trader in New York. Bombardier's report attributed the lower earnings to a slower economy and a reluctance of companies to spend on items such as corporate jets.

BG Energy Capital, guaranteed by BG Energy Holdings, has entered a cross-currency interest rate swap to convert a recent EUR22 million (USD21.49 million) fixed-rate medium-term note into a U.S. dollar-denominated floating-rate offering. The company plans to use similar foreign-exchange and interest rate swaps for future issuance from its euro medium-term note program, said Charles Stewart, head of funding and investment in Reading, U.K. In the swap, BG Energy Capital is paying LIBOR plus a spread and receiving the fixed coupon on the bond, which Steward declined to disclose.

The People's Bank of China is preparing to issue derivatives guidelines that could double the size of the mainland's non-renminbi derivatives market. The guidelines are expected to give formal approval to foreign banks to trade directly with end-users before year end, a move cheered by international players. "Everyone's gung-ho on the prospect of a fully-fledged business in China," said Frédéric Lainé, Asian head of fixed income and derivatives at Credit Lyonnais in Hong Kong. Traders said the derivatives market in China could double in the next 12 months to USD10 billion a year as a result of the liberalization.

Deutsche Bank has hired Takashi Kuniga, an interest rate trader at Credit Lyonnais in Tokyo, for a similar role on its Tokyo desk, according to Richard Herman, head of interest rate trading in Tokyo and to whom Kuniga now reports. Herman declined further comment. Kuniga, who is said to start in the coming weeks, could not be reached for comment.

Commerzbank Securities has launched an integrated research product, which combines research on credit-default swaps, cash bonds, equities and convertibles. The firm is planning a formal roll out in the fourth quarter, building up this type of research to cover approximately 20-30 companies, said Mark Tinker, head of debt and equity strategy in London. The research will be focused primarily around telecom names since those companies have high levels of debt and will benefit from this analysis, he said. Industrial and auto companies are also good candidates for integrated research. Commerzbank also has an integrated trading team for these asset classes (DW 8/12).

Deutsche Bank has for the first time jumped ahead of the undisputed equity warrants leader, Citigroup, in its share of the German market and has laid out its next challenge: to be number one in Switzerland. "We won't be happy with being number two or number three," said Johan Groothaert, managing director and global head of structured products, sales and origination in London. Three years ago, Yassine Bouhara, managing director and global head of structured and flow derivatives at Deutsche Bank in London, told DW the firm's goal was to knock Citigroup out of its top spot (DW, 4/27/99). "We have climbed our Mount Everest," Groothaert said. However, Deutsche Bank still concedes that Citibank is the number one warrants house globally.

Commerzbank Securities' plans to start offering fixed-income, credit, interest rate and foreign exchange derivatives to high-net-worth individuals. At the moment the firm only offers equity derivatives, such as collars, according to Sam Gottesman, head of distribution of derivatives for the Americas.

Recent events, including the default of Argentina, have emphasized the fundamental importance of incorporating the relatedness between the credit quality of a counterparty and the underlying market dependencies of a derivative transaction's mark-to-market value in calculations of credit exposure. More and more we view relatedness as a pervasive aspect of counterparty exposure in the credit and equity derivative markets, not only for foreign exchange derivatives. Though we acknowledge the view of David Rowe, group executive and v.p. for risk management at SunGard Trading and Risk Systems (DW, 4/14)) that a qualitative understanding of wrong-way risks in a portfolio can be achieved via a stress analysis, it is much more challenging to coherently integrate results generated in this fashion with a mark-to-market based hedging strategy.

JPMorgan powers up