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National Australian Bank and Commonwealth Bank of Australia will substantially increase their credit derivatives trading activities this year because they are seeing greater customer demand and improving liquidity in the nascent market, according to officials at the banks. NAB has recently received regulatory approval to actively trade credit derivatives and CBA expects to receive the okay in the coming months. "We hope to receive approval before the end of the fiscal year," said Fergus Gilbert, head of credit trading at CBA in Sydney, noting that the fiscal year end is June 30.

WellPoint Health Networks, which grossed more than USD13 billion in annual revenues last year, is considering entering an interest-rate swap to convert a recent USD350 million note offering into a floating-rate liability. The Thousand Oaks, Calif.-based health care provider is contemplating entering a swap in which it would receive the 6.3% coupon on the 10-year notes and pay a LIBOR-based rate, according to a company official. The maturity on the swap would match the maturity on the note offering.

Commonwealth Bank of Australia has recently transferred Mike Halloran, global head of credit trading in Sydney, to the London desk to bulk up CBA's capabilities in the City.

Croatia is considering using over-the-counter fx options later this year in what would be its first use of OTC derivatives.Hrvoje Radovanic, assistant finance minister at the Ministry of Finance in Zagreb, told DW the sovereign is planning to use fx options to hedge currency exposure as it becomes more active in the international debt capital markets and grows in sophistication in managing risk. "We are closely monitoring the possibility of using them," he said.

Robeco Alternative Investments may use over-the-counter derivatives to structure a guaranteed fund of hedge funds it plans to launch in the spring. Edwin Noomen, v.p. in Rotterdam, said the fund is likely to be around EUR50 million (USD42.9 million), have a five year maturity and will be referenced to a portfolio of 15 funds across six categories, including convertible arbitrage and global macro.

Wall Street equity derivatives desks were abuzz last week with reports that Credit Suisse First Boston had bucked this year's trend and paid an eight-figure bonus to one of its star performers. Michael Crooks, managing director in equity derivatives group and head of the group's private client and retail team, reportedly received a bonus of at least $10 million, said rivals. Crooks did not return calls. Victoria Harmon, a CSFB spokeswoman in New York, denied the rumors. "That is absolutely not true."

Hedge funds shopping for credit protection last week pushed default swap spreads on European names, such as France Telecom and Fiat, about 80 basis points wider apiece. The two names underperformed sector peers, such as British Telecom and DaimlerChysler, which each widened by only 20 bps.

Algometrics, a London-based hedge fund, is seeking to raise up to USD500 million for a flagship equity fund that will trade over-the-counter equity derivatives. The global statistical arbitrage fund will invest in cash equities as well as exchange and OTC-traded equity derivatives, said Stephen Smith, managing director. The fund, which currently has USD30 million in private capital, will also act as an options market maker. Smith believes this will give investors a unique opportunity to take on exposure to market-making profits. The only other way they could achieve this is through buying shares in securities houses, which typically entails taking on exposure to other businesses.

Eight months after announcing its arrival in the nascent credit derivatives market with a pair of high profile hires from Bank of America, HSBC is looking to add at least 10 credit derivatives traders, marketers and structurers in New York, according to a company official. "This is something that has been in the works for more than six months. The ground work has been set and now we're ready to hire," the official said.

The New Zealand Debt Management Office, which runs a NZD37.2 billion (USD14 billion) debt portfolio on behalf of the government, is looking to increase its use of cross-currency interest-rate swaps this year on the back of expanding its euro medium term note program, according to Phillip Anderson, treasurer in Wellington. "We'll borrow somewhere in the range of NZD500 million to NZD1 billion this year," said Anderson. Of the NZD37.2 billion debt portfolio, NZD7.9 billion is denominated in foreign currencies.

Equity derivative marketers in Japan believe in the coming weeks there will be a surge in demand for structured notes embedded with barrier options linked to the performance of the Nikkei 225. The value of transactions could swell to JPY20-30 billion (USD149-224 million) as Japanese retail clients rush to pick up yield before the fiscal year closes at the end of March. "This will likely accelerate in the next couple of weeks," said an equity derivatives marketer in Tokyo. There is currently about JPY37.5 billion of Nikkei-linked notes in the market, of which many were structured in October after the Nikkei bounced back from September lows around the 9,600 level. The index climbed to 11,000 by November.

The failure of Kmart Corp. has spurred Cardinal Health, the largest U.S. supplier of health care products to the retail industry--supplying pharmaceuticals to about 1,600 Kmart stores--to step up its interest in using credit derivatives for the first time. "These guys have looked at buying protection before, but the Kmart blowup has forced them to double their focus," according to a market official familiar with the company's plans. Richard Miller, cfo in Dublin, Ohio, did not return calls by press time. Lisa Kim, a company spokeswoman, was unable to provide a comment by press time.