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As the structured finance markets snoozes its way through August, the September pipeline is silently growing and promises an action packed month. Issuance in the first half of the year is slightly down on that of the same period last year, according to the European Securitisation Forum (ESF). Some Eu60.7bn of issuance is reported so far, 6.3% less than last year.

Dee Valley Water will today (Friday) launch a £35m structured bond via RBS Financial Markets to finance a share buyback scheme and reduce its cost of funding. Issued through Artesian Finance, an RBS vehicle, and wrapped by Financial Security Assurance (FSA), the deal highlights the demand for structured debt across the UK water sector as an alternative to equity and conventional debt finance, after larger corporate restructurings such as Anglian Water Services £1.76bn bond in July.

Bank of America has hired Tony Kay, head of non-Japan Asia credit derivatives trading at UBS Warburg in Tokyo, to oversee credit derivatives trading for the region. "He's a top-notch guy," said one market official. Kay is reportedly receiving a two-year guarantee of USD2 million per annum. "This sets a whole new benchmark for the market," the official added. However, another official said, "They're paying over the top." Kay could not be reached for comment.

Secondary market players were not happy about the current downward trend on bank loan prices this week. The whole market is down five to 10 points, one dealer said with a scowl. Conseco bank debt, for example, was said to have slipped from the high 60s to the 60-62 range following a bank call on Tuesday. At least $10 million is believed to have changed hands. The details of the bank meeting could not be ascertained, but the company currently is contemplating strategies for a more aggressive restructuring plan. Calls to the company were not returned by press time.

"This is still open for debate."--Norah Barger, chairman of the credit risk mitigation subgroup of the Basel committee in Washington, commenting on the committee's stance on dropping restructuring as a requirement for regulatory capital relief. For complete story click here.

Credit-default swap spreads on Aon Corp., a Fortune 500 insurance broker, skyrocketed last week after the company announced the Securities and Exchange Commission was looking into its accounting practices and said it may have to restate earnings for the past three years. Midmarket five-year default swap spreads jumped from 130 basis points Tuesday to as high as 475bps before retracing to 450bps by late Wednesday in New York. "It opened up 200 bid/no offer, an offer came in at 300 and got lifted and it kept going up," said one credit derivatives trader in New York. "The market will punish any company that has a story with guys in badges involved," added the trader, referring to the SEC investigation. The company also announced it was shelving plans to spin off its underwriting unit. Aon shares fell to USD14.77 Wednesday from USD21.38 Monday, with a 52 week high of USD44.80.

Commerzbank and BNP Paribas are recommending bullish euro foreign exchange options trades to investors, taking the view that downward pressure on sterling and the yen will continue. Ian Stannard, foreign exchange analyst at BNP Paribas in London, said assets in Europe generally look favorable compared with other regions. "Inbalances in the U.K. economy continue to grow and there are signs that export manufacturing is starting to falter," he said, adding that Japan will be affected by the slow recovery in the global economy. The firm is taking a medium- to long-term view on the trend and suggesting three- to six-month euro calls against both currencies. For example, the firm is recommending a six-month euro call at JPY120.50, with an approximate price of 0.96%. Euro/yen was trading at JPY117 on Friday. This trade takes advantage of low implied volatility at 8.8-8.9%, which is close to implied vol lows seen in May of 8.6-8.7%, after reaching a high of 10.1% in June.

Credit-default swap spreads tightened across the telecom, auto and industrial sectors late last week as proprietary trading desks started to take profits on default swaps they had bought in the last weeks. Five-year protection on DaimlerChrysler tightened 20 basis points to 160bps last week. Traders said investors were selling positions they had put on at the start of the month when the car manufacturer was trading around 145bps. Five-year protection on Ahold also tightened 20 basis points to 145-165bps by Thursday morning from midday on Wednesday, while Cable & Wireless tightened 60bps to 320-350bps.

The cost of U.S. dollar/Canadian dollar options rose and risk reversals flipped last week amid strong buying interest in greenback puts/Canadian dollar calls. Foreign exchange options traders said vol rocketed because a firm, whom they declined to name, bought nearly a yard of one-month U.S. dollar puts struck at CAD1.57, likely for a client. Spot was at CAD1.5780 late Wednesday in New York, down from as high as CAD1.59 earlier in the week. One-month implied volatility rose to 9.6% after the buying action Wednesday from 8.8% Monday. Traders expected spot to move even lower, as 25-delta risk reversals flipped to 0.2 vol in favor of dollar puts/Canadian dollar calls, from 0.1 vol in favor of dollar calls/Canadian dollar puts on Tuesday.

SNS Bank, the banking arm of banking and insurance company SNS Reaal Group, plans to enter interest-rate swaps and possibly foreign exchange swaps on approximately EUR1 billion (USD966 million) of medium-term notes by year-end. SNS issues approximately EUR6 billion of debt per year, 35-50% of which is issued through MTNs, said Bart Toering, head of capital markets in Amsterdam.

Credit Suisse First Boston and JPMorgan are looking at ways to reduce the foreign exchange risk in synthetic collateralized debt obligations to improve the efficiency of the structure. At the moment CDO structurers get a conservative rating where deliverable obligations can be in several currencies, because a shift in the exchange rate could alter the real recovery rate, said Irene Ho-Moore, managing director at Standard & Poor's in London.

Credit derivatives professionals' paychecks were flat or down on last year, according to a survey by headhunting firm Sheffield Haworth. Credit has been one of the hottest areas in derivatives for the last few years and salaries have been rising steadily, but salaries were capped to subsidize less profitable areas of firms, said one senior credit derivatives pro.