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Kokusai Asset Management, with JPY2.4 trillion (USD19.8 billion) under management, is considering launching a Japanese or global market neutral fund next year both of which would use derivatives, and would be its first foray into alternative investment management, according to an official in the planning department in Tokyo.

Shinko Securities is planning to sell credit-default swaps next year. "It's the biggest potential market," said Toshihiro Ikejima, trader in the fixed income securities department in Tokyo. The firm, which currently sells credit-linked notes, said its clients--mainly domestic corporates and banks--are starting to inquire about the product for hedging purposes. Ikejima continued that it is doubtful that it would look to become a market maker, likely preferring to focus on customer business. He declined to comment if the bank will hire additional marketers for the effort.

Moody's Investors Service is seeking to expand its structured finance teams in Europe with an emphasis on hiring for the London, Milan, Paris and Frankfurt offices, according to Andrew Farr, the agency's structured finance recruitment specialist in London. The credit derivatives, collateralized debt obligation and asset-backed securities teams will all increase their headcount. The additions are being made in response to the explosive growth in demand for structured deals, he added.

The Ontario Teachers' Pension Plan Board is looking to hire an equity derivatives trader early next year to replace a co-manager who left two months ago. The new trader will replace Puneet Kohli, who was a co-manager with Kevin Duggan, according to Duggan, portfolio manager for Canadian equity derivatives in North York, Ontario.

Hedge funds and proprietary trading desks were the most active in the foreign exchange market last week buying one-week euro calls/dollar puts at the start of the week thinking the dollar would weaken in the wake of the continuing U.S. war on terrorism. But after military success showed there was actually a risk of the dollar strengthening they quickly reversed their positions, flipping the risk reversal to favor euro puts/dollar calls by 0.1 vol from 0.2 vol in favor of euro calls, according to New York-based traders. However, one-month implied volatility remained stable last week, at about 10.5%.

Salomon Smith Barney Australia plans to start trading credit derivatives on Australian names in Sydney by the end of the month. The desk will make markets for clients as well as trade on a proprietary basis, according to Glenn Hodgeman, head of Australian dollar credit trading in Sydney. The firm previously offered these products from Hong Kong or London if clients requested pricing.

Credit protection on Sonera, Finland's largest telecom operator, tightened by roughly 20 basis points last week after news that the government has approved the telecom company's EUR1 billion (USD881 million) rights issue. The issue will improve the company's fiscal position. Five-year protection on Sonera tightened to roughly 250bps Wednesday as part of a trend that has seen its credit-default levels come in from over 1000bps in September. "They've continued to make good asset sales, they've managed to refinance and now they are doing a rights issue," said one trader in London, adding the bullish feeling has spread to other European telecom names with British Telecommunications and France Telecom also tightening by a similar amount. "Sonera has really driven sentiment on the telecom side," a trader added.

Swiss Re is preparing a USD150-400 million catastrophe bond deal that it will issue early next year, according to officials familiar with the deal. The proceeds would be used to provide coverage against an earthquake in California. Calls to Swiss Re were not returned.

UBS Warburg is looking at structuring a capital guaranteed product comprising of credit derivatives to sell to retail investors in the U.K. Although the plan is in its infancy and details are scarce, officials at the firm said it hopes to use single-name default swaps to leverage a fixed-income portfolio and generate higher returns than are currently possible in the equity or bond markets. Warburg officials said such a product has not been sold before to U.K. retail investors, who are historically more conservative then their counterparts on the continent. Pros at rival firms were not aware of any similar products.

Zurich Scudder Investments, which manages £14 billion in European fixed-income assets, plans to sell off its positions in Swedish government bonds once the five-year spreads versus bunds tightens to about 40 basis points. Last week, the five-year spread versus bunds was about 60 basis points. Zurich Scudder has built up its position in Swedish government debt over the past few months. Sandra Holdsworth, London-based portfolio manager, says the firm has bought the '06 and '08 bonds recently because the currency has stabilized, the curve has not discounted potential interest-rate cuts and inflation is dropping. The firm sold Eurozone government bonds to fund the purchase. Roughly 82% of Zurich Scudder's £30 million Threadneedle European Bond fund is devoted to govvies, 13% of which is Swedish paper.

Advantus Capital Management is seeking to shorten duration by some 5% to prepare for an anticipated higher-interest-rate environment in 2002. Wayne Schmidt, a portfolio manager who oversees $1.65 billion in taxable fixed-income, says the St. Paul, Minn. firm will probably sell $25 million in 10-year U.S. agency debentures, and buy a combination of three- to four-year corporates and 30-year Treasuries before year-end. Schmidt says he is waiting for indications from the Federal Reserve that it has finished cutting interest rates before making the move. He would also like to see stability, if not improvement, in unemployment and consumer confidence data.