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Goldman Sachs is preparing to market a synthetic collateralized debt obligation out of its New York headquarters referenced to a USD1 billion pool of credit-default swaps on U.S. investment-grade names, according to a market official. The deal, dubbed Gremlin, is expected to hit the market in the next two weeks. The official said it is one of the first rated synthetic products to come out of the firm's New York division as the majority of the firm's synthetic deals have been structured and rated in London, the official added. The switch to New York has been prompted by the firm's interest in attracting its U.S.-based clients, while avoiding the inconvenience of marketing a new deal for U.S. investors in a different time zone. The official said it is likely that this will be the first in a series of Gremlin deals structured over the course of the year. Alex Reyfman, v.p. of CDO strategy for Goldman Sachs in New York, declined comment.

PCI Investment Management, a Hong Kong-based asset manager with over USD500 million in assets, is considering buying basket equity options for its USD20 million equity portfolio in the coming months. Walter Wu, executive director, said it would buy puts to protect against a possible fall in the market. The value of Asian stocks is being kept high by foreign investors which have entered the market this year, said Wu. Adding, if these investors move to other markets there could be a dramatic fall in price. "We're an absolute return biased manager," said Wu, noting that at the moment the fund employs a long-only cash equity strategy, coupled with hedging via index futures or options.

Speculative funds purchased euro calls last week as the euro rallied against the greenback to its highest levels of the year, according to foreign exchange options traders in Europe. Nazim Mahrour, foreign exchange options trader at Société Générale in Paris, said U.S.-based hedge funds were the main source of demand for the options. The euro appreciated to USD0.903 Thursday from USD0.89 the week before and one-month implied volatility jumped to 8.7% from 7.6%.

Henderson Global Investors is working on its first EUR1 billion (USD903 million) managed synthetic collateralized debt obligation. The deal, dubbed Baltahazar, is being structured by JPMorgan and is expected to hit the market in June, according to officials familiar with the transaction. Officials at JPMorgan and Henderson declined comment.

Government-owned Korea Development Bank, the first domestic bank to offer credit derivatives in Korea (DW, 12/23), is looking to set up a credit derivatives market making operation within the next 12 months and offer its first synthetic CDO. H.G. Chung, head of financial engineering in Seoul, said the bank will look to establish a market-making operation and hire credit traders to complement the bank's credit structuring capabilities. He noted that it is too early to estimate the size of the operation.

ING Financial Markets has hired David Singer, head of short-term interest-rate trading at Standard Chartered Bank in Hong Kong, as a trader in its emerging markets department, according to Tim Fallowfield, director of emerging markets in Hong Kong. Fallowfield said Singer will start in the coming weeks and replace a trader who left at the start of the year. He declined to name the trader who left.

Credit-default swap spreads on Repsol YPF, a Spanish oil and natural gas utility, blew out last week as investors were fearful of how its links to Argentina would affect the credit. Traders said spreads widened to 500 basis points-600bps in the short-end of the curve, mainly for one- to two-year protection, from levels in the low 200bps range the previous week. One trader said the spreads widened mainly in the short end of the curve because the credit risk is immediate and buyers of credit-default swaps would not want to pay for protection further out.

Credit Lyonnais has hired Eric Lam, director in the structured products group at ING Financial Markets in Singapore, to head its recently established credit structuring operation in Hong Kong, according to market officials. Currently, the two structurers on the desk report to Fredéric Lainé, Asian head of fixed income and derivatives in Hong Kong. The desk was only set up at the start of the year and the intention was always to hire a head (DW, 12/16). Lam resigned from Lyonnais in April (DW, 4/14).

Lehman Brothers has restructureed its interest-rate derivatives trading group in New York to create a cross-rates operation offering customers packages of risks from various trading desks. The initiative, which closely resembles cross-rates operations at Deutsche Bank and UBS Warburg, was set up last month after the firm moved offices, according toKaushik Amin, managing director and global head of interest-rate products in New York.

Mexican peso/U.S. dollar implied volatility climbed steadily last week after the Mexican financial authorities lowered interest rates and the peso weakened. One-month implied vol rose to 9.5% Thursday from 6.25% at the start of the week as profit takers bought at-the-money forward straddles.

Most international private and official institutions and professional observers were surprised by the abruptness of the 1997-98 Asian financial crisis and its subsequent contamination. There is also a broad consensus that neither multilateral agencies nor international investors anticipated the full scope of the crisis.

Swiss Re is preparing a novel USD200 million multi-peril catastrophe bond that is expected to hit the market by early June. It will be the first CAT bond to offer investors exposure to four separate categories of risk, according to CAT bond experts. The bond, which will have a three-year maturity, will cover Japanese and California earthquake risk, New Madrid, Mo. earthquake risk, European wind storm risk and Atlantic hurricane risk, according to a CAT bond professional in New York.