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Sumitomo Mitsui Banking Corp. plans to set up a credit derivatives operation in the coming months for trading and hedging credit risk on its JPY77 trillion (USD650 billion) loan book. Yamamoto Toru, v.p. and head of the portfolio management department in Tokyo, said he will spearhead the effort, "hopefully [starting] within six months."

Two heads of J.P. Morgan's cash and derivatives credit team were let go last week as reverberations from the merger with Chase Manhattan continue to rumble through Asia. Warren Burroughs, co-head of Asian credit trading, and Martin Matsui, head of Asian credit sales, left the firm last week. Both reported to Chris Nicholas, Asian regional head of credit markets in Hong Kong. Nicholas said J.P. Morgan is reorganizing the department because of the economic downturn and because it is still in the process of combining J.P. Morgan, Chase and Robert Fleming. Burroughs and Matsui could not be reached for comment.

Jae Oh, director of integrated credit trading at Deutsche Bank in Singapore, moved to London two weeks ago. He ran the credit swaps desk for Asia ex-Japan and now trades investment grade credit default swaps in London, according to Prakash Krishnan, spokesman in Singapore. Oh made the move because he wanted to trade the London credit market, which is much larger than its Asian equivalent, according to an official familiar with the situation.

J.P. Morgan is recommending clients buy Korean won puts/dollar calls to capture volatility as the won sinks lower against the dollar, following a slump in the global technology sector. "The best thing to do is buy outright volatility," according to Louis Cucciniello, head of options in the Lion City. "Now's not the time to get fancy," he added. Cucciniello recommends buying volatility through options and avoiding using structures, such as call spreads, that would limit the upside potential.

French rail operator SNCF has entered a cross-currency interest-rate swap to convert a USD200 million fixed rate bond into a euro-denominated synthetic floater. Mizuho International, formerly known as IBJ International, was the bookrunner and swap counterparty. Frank Toulouze, director in primary and structured finance at Mizuho International in London, said in the swap SNCF pays six-month Euribor and receives the 4.81% coupon on the bond. Six-month Euribor was 3.55% on Tuesday. The swap matches the five-year maturity of the bond.

Stamford, Conn.-based Citizens Communications plans to tap the interest-rate derivatives market for its first use of any type of derivatives. Don Armour, treasurer and v.p. of finance, said the company has recently started discussions with several investment banks about entering fixed to floating interest-rate swaps to hedge interest-rate risk on part of its USD4.25 billion debt portfolio. About USD3.5 billion of the debt was raised over the last eight months through two separate bond offerings of USD1.75 billion each. He declined to name the banks.

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Steven Goldstein, president of TradeWeather.com, an on-line weather derivatives company, is among the thousands still unaccounted for following the Sept. 11 terrorist attack on the World Trade Center in New York. Goldstein, who launched Tradeweather.com in 1999, moved into the North Tower of the WTC about three weeks ago. The move followed Cantor Fitzgerald's acquisition of the company which was incorporated into the broker's emissions trading group, according to a market official. Cantor occupied floors 101-105 in the North Tower. Officials at Cantor did not return calls.

One-month euro/U.S. dollar implied volatility fell 2% last week as traders concluded that the greenback will hold its value because the terrorist attacks in the U.S. will impact Europe as much as the U.S. One-month vol fell to 12% Thursday from 14% the previous week and one-year vol fell to 12.6% from 13.3% Tuesday. Proprietary traders selling one-month and shorter-dated euro calls/dollar puts drove the fall in volatility. Most of the options were at-the-money with spot fluctuating around USD0.9150 throughout the week. The selling of euro calls caused the one-month 25-delta risk reversal to fall to one vol point in favor of euro calls Thursday from two vol points the week before. Traders were selling options because the forecast fall in the dollar against the euro did not materialize and option holders were losing money through time decay. Traders said volumes have not yet returned to the levels that they were at before the terrorist attacks in the U.S.

Peter Colvin, senior v.p. and Asian regional head of corporate distribution at ABN AMRO in Singapore, resigned last week. "I'm going to Queensland," Colvin said, adding that after 15 years at the bank it is time to take a break. He has no immediate plans to reenter the business.

Banc of America has hired Dik Blewitt, chief strategic officer at creditex in New York, as a managing director in its structured credit products group. Blewitt said he is structuring credit products for pension fund and insurance clients in the U.S. The appointment was a strategic hire by the firm rather than part of an expansion of the department. "It is a homerun in terms of opportunities," he quipped, referring to the firm's large balance sheet and global client base.

UBS Warburg continued to enhance its presence in the Japan equity capital market when, last Friday, it completed the sale of 15.1525m shares of convenience store operator Lawson on behalf of troubled property group Daiei. The deal secured the equivalent of almost $500m for Daiei despite the protracted slide in the Tokyo stock market.