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Bank of America is looking to ramp up its interest-rate derivatives marketing capabilities in Hong Kong, according to Sanjay Mansabdar, principal of interest-rate trading in Hong Kong. He continued that BofA is looking to add two or three additional marketers in the coming months to the team as the business continues to grow, but was travelling and could not be reached for further comment.

Sun Life Financial Services, a life insurance company with more than USD300 billion in assets, aims to use credit derivatives for the first time by the third quarter to buy protection on its corporate bond investments. A company official said the insurer is in discussions with investment banks, including JPMorgan and Credit Suisse First Boston, about ironing out the regulatory issues involved with income tax and accounting before entering its first deal. Officials at JPMorgan and CSFB declined to comment.

CIBC World Markets has created a synthetic collateralized debt obligation group in London, according to market officials. The group, which is comprised of about seven professionals, including marketers and structures, was formed last month to meet the growing demand for synthetic products in the European market. A credit derivatives official at CIBC confirmed the bank has hired "some structured people to work on our credit platform," declining further comment.

Credit-default swap trading on Hutchison Whampoa rocketed last week on the back of demand from convertible arbitrage players and hedge funds, according to traders in Asia. "The bid has been driven up by convertible bond arbitrage players," said Loic Fery, Asian head of credit derivatives at Crédit Agricole Indosuez in Hong Kong. Fery noted that Indosuez entered several of the trades, declining to elaborate. He continued that interest was seen across the curve, in two-year, three-year and five-year. "Hutch is probably the best value for a single-A credit in Asia," added Fery. He noted that last Monday, the two-year default swap was around 125-140 basis points and tightened to 120-130bps by Wednesday.

The Republic of Cyprus is considering entering its debut interest-rate swap to convert the fixed-rate liability on a recent EUR550 million (USD480 million) bond into a floating-rate obligation. The move comes as the Mediterranean republic's proportion of fixed-rate debt rises and as it looks to become a more sophisticated risk manager in preparation for its expected European Union entry in 2004. "We are getting more into the European market and as a result are becoming more conscious of pricing and market movements and interest rates," said Leslie Manison, advisor to the Ministry of Finance in Nicosia. The republic raised EUR550 million (USD480 million) through a 10-year deal earlier this month. In the swap it will pay a floating rate and receive the 5.5% coupon on the bond.

Euro/dollar one-month implied volatility hit its lowest level in three years last week as a range-bound spot led to a continued decline in demand for options. One-month vol fell to 8.05% by Thursday from 8.75% at the start of the week, this is its lowest level since February 1999. Implied vol was roughly 10% at the start of the month. "The market's been really slow and range-bound, it's not giving any signals which way it will break," noted one options trader. Although activity was generally scattered, he said there was a sizable interest from clients buying longer-dated euro calls/dollar puts with strikes between USD0.88-USD0.92. Spot was USD0.87 Thursday. "We've seen a lot of clients covering their long dollar positions by buying euro calls for hedging" one trader said.

Default-swap spreads on France Telecom have inverted--the first time that has ever happened in the European credit derivatives market--due to demand from hedge funds seeking to buy short-dated protection to hedge credit risk on the company's short-dated convertible bonds. Mid-market three-year protection was 275 basis points Thursday, while mid-market five-year protection was 255bps according to Chris Francis, head of international credit research at Merrill Lynch. Robert McAdie, structured credit analyst at Lehman Brothers in London, added, "This is an interesting phenomenon that is really being driven by hedge funds in the market."

Fortis Bank is marketing its first global sector click notes and has used over-the-counter derivatives to structure the product. Koen Zoutenbier, senior account manager on the derivatives and structured products desk in Amsterdam, said the product is structured by purchasing a zero-coupon bond and a click option.

Groupe Casino, the French retail superstore, has entered an interest-rate swap to convert a fixed-rate bond it issued earlier this month to a floating-rate liability. Regis Taillandier, head of funding in St-Etienne, said the company converted the EUR400 million (USD350 million) transaction into a EURIBOR-based rate through over-the-counter swaps with the lead managers on the deal: JPMorgan, Société Générale, Credit Lyonnais and Natexis Banques Populaires. A Natexis official confirmed the swap while a SocGen official declined to comment. JPMorgan and Société Générale officials on the swap did not return calls.

Marsh, one of the largest insurance brokers in the world with USD4.78 billion in revenue, is working to set up a weather derivatives desk in New York to broker plain-vanilla weather derivatives. Marsh plans to broker deals on behalf of its insurance clients, according to a company official. The company has hired Partho Ghosh, a weather derivatives marketing manager at Enron in Houston, to help lead the effort. Ghosh declined to comment.

A 50% cut in bonuses is reportedly to blame for prompting half of Goldman Sachs' convertible arbitrage trading desk in New York to quit over the last month, according to market officials. Trader Alex Lache recently became the third member of the team to depart. Lache left the firm to join Camden Asset Management, a hedge fund in Los Angeles, to fill a similar position. Bruce Corwin, spokesman at Goldman Sachs in New York, declined comment.

Credit default-swap protection on Household International, the consumer finance giant in Prospect Heights, Ill., widened 12 basis points Wednesday, as investors lost confidence in the firm after allegations that it overcharged borrowers in California, according to credit-default swap traders. Mid-market default swaps were quoted around 215bps Wednesday in comparison to 180bps a week earlier.