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FleetBoston Financial is planning to launch its first synthetic collateralized debt obligation in the Asian market this year on the back of increasing client interest. "Hopefully we'll have this out in the next few months," said Sean Ko, head of fixed-income in Singapore. He noted the CDO is likely to be a USD500 million balance sheet transaction. However, he added, the firm will also structure arbitrage synthetic CDOs.

Natexis Banques Populaires plans to open a London office for fixed income and derivatives sales and initially hire up to 10 salesman as part of the effort. Olivier Regis, co-head of global capital markets, said the bank will open the desk at the end of next month. "To be a global bank without anything for sales in the U.K. is crazy," he acknowledged, adding the firm hopes to change that. Natexis currently has commercial bank branches in London but not on the securities side.

Foreign exchange options pros are at odds over South Africa's rand and related options bets, as the currency continues to weaken against the U.S. dollar and amid the launch of an official South African government investigation into the rand's fall. In a controversial move, the Reserve Bank of South Africa hiked rates by a full percentage point last week to counter the inflationary risks posed by last year's weakness in the rand, which fell 37% against the dollar. Following these moves, Bear Stearns thinks the rand will find support and gain from its recent lows and as a result the firm is recommending zero or low-cost option packages to take advantage. Other firms, such as Citibank/Salomon Smith Barney and BNP Paribas, have less confidence in a rand rebound and said the rate hikes will only further crimp economic growth.

HSBC Asset Management plans to buy over-the-counter equity call options to structure a guarantee on a global sector equity fund it will launch at the end of the month. Bill Maldonado, head of the tactical investment unit in London, said the fund manager will buy calls on baskets of stocks in four underlying sectors: financials, pharmaceuticals, energy and healthcare.

Crédit Agricole Indosuez has hired three professionals for its interest-rate and credit derivatives desks. The French bank has added Pierre Trecourt, v.p. of financial engineering at Société Générale in Hong Kong, as Asian head of credit derivatives structuring, and Lucille Chu, derivative sales and trading at China Construction Bank in Hong Kong, as director for Greater China derivative sales. It has also hired Dennis Wong, interest-rate derivatives trader at Bank of America in Hong Kong, who will hold a similar role when he joins in the coming weeks, according to officials at the firm. Wong could not be reached for comment.

Nomura International plans to hire two or three asset-backed securities specialists for its securitization team in London. Tariq Rafique, head of securitization and asset finance in London, said the new recruits will structure cash and synthetic securitizations. He added that the new hires will report to him and he aims to have them on board by the end of the quarter.

Lehman Brothers reportedly entered over EUR3-4 billion in (notional) two-year interest-rate swaps last week, which traders said was the first massive trade of the year. Traders in London said the swaps were executed Tuesday and Wednesday and were probably on behalf of a U.S. fund manager reducing its exposure to Europe. The size of the trade caused rates in the short-end of the curve to raise approximately four basis points, according to traders. In the swaps Lehman pays fixed at between 3.93-3.87% and receives Euribor. A swaps trader at Lehman referred calls to the press office, who did not return calls.

Penn Mutual Life Insurance in Philadelphia has reinstated David O'Malley, v.p. of credit derivatives product management and marketing to U.S. clients for Morgan Stanley in New York, as a portfolio manager. An official at Morgan Stanley said O'Malley left the bulge-bracket firm because he received an offer from Penn that increased his annual salary and gave him more oversight of the insurance company's derivatives strategies than he had when he left. Penn had not yet filled O'Malley's position and had become a virtual non-player in the derivatives market following O'Malley's departure, one Penn official said. O'Malley now reports to Peter Sherman, cio. Sherman did not return calls and O'Malley declined to comment.

The Kredittilsynet, Norway's financial regulator, has drafted new legislation that would allow Norwegian fund managers to invest in over-the-counter derivatives for the first time and free up as much as EUR4.5 billion (USD4 billion) for OTC instruments. Ellen Jakobsen, advisor to the regulator in Oslo, said it has put out a draft of the revised securities rules and is now taking recommendations from the industry. The regulator expects to submit a final draft of the derivatives-specific legislation, which would allow asset managers to invest up to 10% of their portfolios in unlisted securities, to the Ministry of Finance for approval by spring, she said. Funds can currently use only exchanged-traded equity derivatives.

The Stock Exchange of Hong Kong is set to re-launch its warrant market next week and equity derivatives pros expect stiff competition as they look to issue warrants on the largest corporates. "It will be a war of attrition," according to Eddie Tam, director of equity derivatives at Credit Lyonnais in Hong Kong, who added, "historically, the warrant market in Hong Kong can feed five to seven houses. There will initially be 13 houses issuing." Tam expects the smaller firms who he said have been the most active in previous years, including Credit Lyonnais, Macquarie, Société Générale and KBC Financial Products, to win market share from the larger firms, such as Merrill Lynch." U.S. houses have waxed and waned on their commitment," according to Tam. James Rodríguez de Castro, managing director of global equity-linked products at Merrill Lynch in Hong Kong, declined to reply to Tam's remarks.

Credit-default protection on The Dow Chemical Co. widened 100 basis points on Wednesday after Fitch downgraded the science and technology company, with USD30 billion in annual sales, to A from A plus and put it on negative outlook. Credit spreads on Dow widened to about 150bps last Wednesday from 50bps a week earlier as bulge bracket firms looked to buy protection.

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