Search results for

Deutsche Bank has hired Robert Grillo, a managing director who traded liquid mortgage-backed securities and derivatives at New York-based hedge fund CDC Investment Management, to man its cross-rate desk in New York. Grillo, who started at Deutsche Bank last week, reports jointly to Jon Kinol, managing director of North American over-the-counter derivatives in New York and Thomas Paul, managing director and head of government bond trading. "Rob brings us a different skill set coming from the buyside. He has a strong expertise in mortgages and the hedging of mortgages with OTC products" Kinol said.

Foreign exchange options traders piled into euro/dollar risk reversals last week to profit from euro/dollar movement. In the risk reversals the traders sold 25-delta one-month euro calls/dollar puts and bought euro puts/dollar calls causing the risk reversal to move to 0.35 vol in favor of euro calls on Thursday from one vol Monday. The strikes on the calls were around USD0.90 and the strikes on the puts were USD0.865 when spot was trading USD0.8952 on Thursday. A trader added several hundred million dollars in one-month twenty-delta euro puts went through the broker market on Monday.

Ten-year credit default swaps on major corporates have started trading in the Japanese interbank market in the last few weeks. "A few selected Japanese investors decided to extend their investment horizons to get higher yields," said Ralph Orciuoli, managing director in structured credit products at Bank of America in Tokyo. NEC, Sony, Fujitsu, Toshiba and Toyota were among the names traded. Ten-year credit protection on Sony traded in the low 80 basis points, which is double the five-year price. Before the last few weeks a handful of 10-year prices had been quoted but this last burst of activity represents the beginning of a market, according to traders.

Five-year credit default swap spreads on Ford Motor Credit and General Motors Acceptance Corp. widened 20-25 basis points on the back of GMAC's USD6 billion global notes offering last week and growing uneasiness over both auto makers being put on negative credit watch in mid-August by Fitch and Standard and Poor's. A New-York based trader reported that credit default swap spreads on GMAC had widened to about 93bps Thursday from about 64bps two weeks ago.

Edgar Senior, a structurer and marketer in the synthetic portfolio credit department at Goldman Sachs in London, is moving to the investment bank's New York office to take a similar position. Senior said he is making the move because the market for high-yield synthetic CDOs is much larger in the U.S. than in Europe as the underlying assets are more liquid. Senior declined further comment.

Merrill Lynch is conducting a feasibility study into structuring the first synthetic collateralized debt obligation referenced to shipping loans. The firm is looking at structuring the deal on behalf of a third party bank, which has a USD1 billion portfolio of shipping loans and wants to remove credit risk from its balance sheet, according to an official familiar with the deal. Bankers at Merrill declined comment.

Bulent Osman, head of the U.S. dollar interest-rate options desk at J.P. Morgan in New York, has been made redundant. An official familiar with the departure said Osman was let go as part of the firm's efforts to cut costs. Osman could not be reached for comment. Sara Strang, head of Bermudan options in New York, has been promoted to fill Osman's position. She confirmed her appointment and said the two positions have been merged, but declined to comment further.

Bharat Petroleum Corp. plans to start using crude oil derivatives and ramp up the number of interest-rate swaps it enters to hedge its liabilities portfolio in the coming months. Panchpakesan Bala Subramanian, chief manager of the treasury in Mumbai, said that with board approval, which is just a formality, the firm will look to re-enter the interest-rate derivatives market by December and start using crude oil derivatives in January. Its exposure to imported oil in the first quarter will be approximately 20 million barrels, which was equivalent to USD536 million on Friday.

The Hong Kong branch of Italian bank IntesaBci is considering buying into its first synthetic CDO in Asia. Rebecca Chang, associate director of the structured finance and advisory group, said the bank is studying the feasibility of investing in such structures as new issuances in the Asian convertible bond market, where IntesaBci normally invests, have been drying up in recent months. Chang continued that she has yet to contact any potential counterparties as it is in the initial stages of evaluation and that she is in touch with the European offices of IntesaBci about the possibility of investing in synthetic CDOs referenced to a basket of Asian names. No time frame has been decided.

Korean cross-currency interest-rate swap spreads are expected to widen over the next month as more than USD1 billion of asset-backed bonds come to the market. Kookmin Card, LG Capital, Hyundai Card, Samsung Capital and Samsung Credit Card all plan to issue asset-backed securities, according to traders, who added the companies intend to enter swaps to hedge their foreign exchange and interest-rate exposure. "The ABS market is hot in Korea," noted one interest-rate trader. He added that ever since the success of the first off-shore ABS transaction by Samsung Capital in April corporates have been lining up to execute similar deals (DW, 4/8).

The first swap agreement took place between IBM and the World Bank in the early 1980s. Since then sophisticated products have been developed to meet the needs of capital markets players searching for higher returns for investors and more efficient hedging tools as well as offering new financing means for international companies. In order to handle these new complex products and to manage their risk, a range of pricing models have been introduced over the last few years.

Taiwan Life Insurance, with over USD2.1 billion in assets, is considering purchasing structured products such as structured notes, synthetic CDOs and equity-linked notes. Jenny Chen, financial products fund manager in Taipei, said the insurer is now considering structured products to obtain enhanced yield. She continued the insurer is submitting an application to the Ministry of Finance, as insurers are currently not allowed to invest in products such as CDOs. Johnson Lai, head of finance in Taipei, believes the MoF will likely acquiesce as insurers and several international investment banks are lobbying it, and Taiwan Life will be able to invest in these within six months. Calls to the MoF were not returned. One market official in Hong Kong said that although his bank is not directly speaking to the MoF, he knows of several insurance companies in Taiwan that are in talks, adding the rules could change within two or three months.