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The Kowloon-Canton Railway Corp. (KCRC), a railway operator in Hong Kong, may enter interest-rate swaps in which it pays floating because it anticipates that interest rates will continue to fall. Jeffrey Cheung, deputy finance director in Hong Kong, said the corporation will consider entering swaps on the back of a 10-year USD1 billion 8% global bond it issued in March last year.

HSBC has hired Andrew Broeren, associate director in the structured finance group at Standard & Poor's in London, and Stuart Benzie, associate in the wholesale banking and risk management practice at McKinsey & Co. in London, to beef up its securitization team. Bahman Jahanshahi, head of private and structured finance in treasury and capital markets in London, said HSBC made the hires in response to demand from U.K. corporates that want to securitize assets and from investors who want to get exposure to the transactions. He added this was part of a long-term trend rather than in response to any immediate factor.

HSBC recently brought aboard C.S. Yang, former corporate finance mergers and acquisition specialist at J.P. Morgan in Seoul, as v.p., treasury, head of derivative sales in Seoul. He replaces Shim Kai Wan, v.p., treasury, who has relocated to HSBC's Toronto office.

Credit default-swap spreads for five-year credit protection on Invensys more than doubled last week after the company issued a profit warning and its chief executive resigned. Protection prices on the U.K. manufacturer blow out to 350 basis points Wednesday from 150bps the Friday before. Traders said Invensys is a liquid name so there continued to be a two-way market but offers to write protection started drying up as banks' credit lines were slashed by their credit departments, according to one trader. The typical deal size was EUR10 million (USD8.8 million).

Korea's foreign exchange swaps market could double in notional size over the next year if ongoing talks between insurance companies and the Financial Supervisory Service (FSS) result in raising the cap on foreign investments, said traders in Seoul. Insurers are pressing the FSS to raise the cap--currently set at 10% of assets--because they are hungry for yield in Korea's low interest rate environment, explained an official at Samsung Life in Seoul. Increased investments in foreign stocks and bonds will spur currency hedging activity via the swaps market, he continued. Officials at the FSS declined to comment.

Merrill Lynch, which launched Singapore's first exchange listed equity-linked note earlier this year, is planning on listing others in the near future. "We're looking forward to doing more," said Raymond Wong, managing director, global equity linked products in Hong Kong. In May Merrill listed Yield Enhanced Structure (YES) certificates based on shares of DBS Group Holding. He added that listing equity-linked notes allows greater transparency. Wong continued that the products are available on demand and more are on the way to meet demand from the retail market, declining to elaborate.

Merrill Lynch has added credit derivatives pricing and research to its on-line trading site, MLX. An official at Merrill Lynch said the service offers pricing on 150 U.S. names and expects that number to double when European names go live in the next couple of weeks, soon to be followed by Asian names. The site gives clients indicative prices for credit default swaps and asset swaps, as well as research, a pricing calculator to mark positions to market and credit derivatives documentation. There are no plans to add execution because of the difficulties connecting the site to other systems and the lack of customer demand.

Sachsen LB Europe plans to use credit derivatives for the first time for investment and hedging by year-end if it receives approval from its parent Landesbank Sachsen Girozentrale. Adrian Fitzgibbon, managing director of Sachsen LB Europe in Dublin, said it is discussing the risk management, systems and legal framework needed to use credit derivatives with its parent at the moment. He declined all further comment. Officials at Landesbank Sachsen Girozentrale also declined comment.

PointWorth Management Private is in the process of launching two hedge funds that will take long/short positions in equity markets and may use exchange-traded or over-the-counter derivatives. Dennis See, ceo in Singapore, said the Boulevard Japan and Boulevard Global funds will close at USD100 million each. "We have been looking at futures, options and OTC swaps," he said, adding, "we are not going to be in that space in a big way." In particular, the investment manager is wary of using OTC derivatives because, compared to exchange-traded products, there is no transparency, they are not cheap and they entail taking on counterparty risk.

Twenty-five delta one-month risk reversals showed a stronger bias in favor of euro calls/dollar puts in the last two weeks after the euro started to strengthen against the greenback. Traders said market makers were snapping up risk reversals in anticipation of further euro upside. The one-month risk reversal jumped to 0.81 in favor of euro calls/dollar puts Wednesday from 0.2 two weeks ago. Implied volatility shot up across the board. One-month vol was 12.1% Wednesday from 10.85% two weeks ago as the euro appreciated to USD0.8796 from USD0.8552 in the spot market.

Stone Ridge Investment Partners plans to shorten duration by 2.5% if the 10-year Treasury closes with a yield at or below 5%: it would cut duration to 4.39-years from its current 4.5-year level. Last Monday, the 10-year was at 5.10%. David Killian, portfolio manager, says he would buy two- and 30-year U.S. Treasuries, selling intermediate maturity Treasuries to shorten duration. He says he has no idea whether yields will fall below 5%. He believes the Federal Reserve has mostly finished easing rates, because the most recent cut was only 25 basis points instead of the 50 many had expected.