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Deutsche Bank is consolidating elements of its global cash and derivatives credit business in a move designed to take advantage of increasing overlap between the various elements of the credit business, according to Rajeev Misra, global head of credit trading in London. However, one official familiar with the firm said the moves are motivated by a need to cut costs, which Misra denied.

Deutsche Bank is looking to hire two to three mortgage-backed traders as part of an initiative to put its agency mortgage-backed trading team under the umbrella of fixed-income derivatives, said Jon Kinol, managing director of fixed-income derivatives and cross-rates trading in New York. The desk, which deals with Fannie Mae and Freddie Mac-related products, has previously been alongside other mortgage products such as commercial mortgage-backed securitizations.

Dollar-denominated risk reversals have dominated the foreign-exchange options market throughout the last four weeks and traders have seen volumes increase even more in the last two weeks. One trader said he had seen four to five yards of risk reversals in euro/dollar and dollar/Swiss combined go through the market each week for the past month, compared with a more typical one to two yards. Another trader said he saw three to four times typical levels for euro/dollar and dollar/yen, but would not give a base volume. Investors bought dollar puts against the euro, yen and Swiss franc as the dollar weakened against the three currencies. The typical sizes of the individual trades is USD30-100 million.

The cost of dollar/euro options edged slightly higher last week as the common currency continued its assault on the greenback in the spot market. One-month implied volatility rose to 12.1% by Wednesday in New York, up from 11.5% at the start of the week as the dollar gave up gains it notched up during the preceding holiday-shortened week. Traders said although the euro still appears headed higher, the options market has been somewhat choppy as punters take profits once spot hits USD0.98, only to enter new long euro options once spot falls to USD0.97. Spot was trading at USD0.989 Wednesday.

Fleming Companies, the largest distributor of packaged foods in the U.S., is planning to become a regular end user of foreign exchange derivatives to hedge exposure to the Canadian dollar, according to Matt Hildreth, senior v.p. of finance in Lewisville, Texas. The company has in the past only used fx derivatives sporadically--twice in the last five years--but is now gearing up to increase its use of fx options following last month's acquisition of Core-Mark International. The packaged goods distributor has four of its 19 distribution centers in Canada. Hildreth estimated Fleming will enter options on a monthly basis, typically USD20-25 million (notional) per month, to hedge against movements between the greenback and its northern neighbor. He was unable to quantify the revenue Core-Mark generates in Canada.

The low interest-rate environment and the tightening in Asian credits have caused many investors to start considering structured investment products for yield enhancement by taking either market risk or credit risk. Usually, a structured investment product can offer yield enhancement based on a specific market view. A LIBOR corridor is a typical example. A LIBOR corridor note will offer extra return if LIBOR evolves according to the range determined at the outset of the transaction while the downside is a loss in coupon or part of the principal if the actual market movement goes against the view. This kind of structured note is usually issued from the European medium-term note program of reputable issuers, with payment of coupon or sometimes principal linked to the evolution of one or more market parameters, such as an exchange rate or interest rate.

The Florida Municipal Power Agency has entered several interest-rate swaps and was set to tap the bond market last week with a USD245 million multi-tranche offering of floating-rate revenue bonds to pay down existing debt and slash its interest burden. A spokesman in Orlando says the agency hopes to cut its funding bill by some USD5 million annually by refinancing USD250 million of bonds with average coupons of roughly 5%.

Fukoku Mutual Life Insurance Co. is planning to use credit-default swaps for the first time to hedge a portion of its USD5 billion fixed-income portfolio. "These can be used to hedge our bond portfolio," said Ichiro Yamada, manager of the international finance department in Tokyo. He continued that the insurer is currently studying the products with a number of investment banks and would look to buy default protection as a way to hedge credit risk on global bonds. Yamada said it would, "Hopefully [take the plunge] in six months but likely within 12."

JPMorgan is planning to create index products based on specific sectors within the Standard & Poor's American depository receipt index. The firm already offers investors products based on the entire ADR index, said Jerry Hanweck, equity derivatives strategist in New York. JPMorgan is waiting for S&P to begin publishing pricing for sector-specific indices and then will launch over-the-counter derivatives products, including total-return swaps and options. Eventually, JPMorgan will look to launch exchange-traded funds on the index and individual sectors.

JPMorgan has hired William Measday, associate director at Macquarie Bank in Sydney, as v.p. of credit structuring in Sydney. He is the firm's first onshore structurer to handle credit products, according to Mahesh Bulchandani, head of structured credit products in Tokyo. "This will provide a platform to grow our collateralized debt obligation business," said Bulchandani, noting that Measday will look over both repacked mortgage-backed securities as well as credit derivative products. Bulchandani noted that previously JPMorgan marketed credit products such as synthetic CDOs to Australian investors out of its Tokyo branch but added with the continued growth in interest it now made sense to hire someone. Measday now reports locally to Jason Lee, head of debt capital markets in Sydney, and product-wise to Bulchandani.

Credit Lyonnais is expanding its recently launched credit derivatives operation in Japan, according to Edward Willems, head of distribution and Japan head of credit derivatives in Tokyo, who is spearheading the effort.

The E.W. Scripps Co., a media outfit with interests in print, broadcast and new media, is looking to enter its debut interest-rate swap as a public company and its first in more than a decade, said John Wolfzorn, treasurer in Cincinnati. He said the company has entered interest-rate swaps in the past, but none since its initial public offering in 1988. He was unable to provide more information about the company's previous use of swaps.