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Basis Capital, a relative value/arbitrage hedge fund in Sydney with AUD20 million (USD10.2 million) under management, recently purchased credit default protection on Australian packaging firm AMCOR to hedge a long position in convertible bonds issued by the company. Steve Howell, cio in Sydney, said the hedge fund purchased protection at LIBOR plus 60 basis points. He declined to reveal the notional size, tenor or counterparty.

Mike Reeber, global head of convertible bonds at Deutsche Bank in New York, is moving to Tokyo to become head of Asian equity derivatives. Rick Goldsmith, global co-head of equity derivatives in New York, said the move follows the departure of Masatoshi Inoue, who quit the world of banking to work for a software company in Seattle (DW, 4/23). Reeber will report to Goldsmith and Ralph Reynolds, global co-head of equity derivatives. Reeber and Reynolds were traveling and could not be reached.

Ross McIntrye, manager in the weather derivatives group at Enron in London, resigned last week to join Deutsche Bank's nascent weather derivatives group. McIntrye will report to David Pearse, who heads the weather derivatives desk at Deutsche Bank in London. Officials familiar with the move said McIntrye's contract requires him to stay out of the market for three months. However, Enron is believed to be considering revoking this clause to speed up Deutsche Bank's fledgling effort in order to boost liquidity. Deutsche Bank is one of the largest banks to start a weather desk (DW, 5/20).

Volumes in yen puts/dollar calls doubled last week as the yen depreciated against the greenback to JPY123.74 and the market predicted a further slide. One trader said banks were buying yen puts with strikes between JPY127-JPY128 with maturities out to nine months. The demand for yen puts/dollar calls caused the 25-delta risk reversal to spin around from 0.1 in favor of yen calls/dollar puts two weeks ago to 0.5 in favor of yen puts/dollar calls last Thursday. A U.S.-based trader estimated USD2 billion (notional) of yen puts traded last week, which is the approximate typical volume for the whole dollar/yen options market on a normal week.

Dresdner Kleinwort Wasserstein and KBC Derivatives are attempting to lure investors back to the Italian reverse convertible market by structuring products with lower risk profiles. Alfredo Paramico, head of equity derivatives for Dresdner Kleinwort Wasserstein in Milan, said convertible volumes have fallen to between 5%-10% of last year's levels because investors lost about 70% of their principal investments. As a result structurers are attempting to come up with defensive products which still offer reverse convertible like returns, he noted.

Lehman Brothers and Société Générale are structuring synthetic collateralized debt obligations based on reference portfolios of EUR1.5 billion (USD1.28 million) and EUR500 million, respectively, according to indicative term sheets obtained by DW. SG's deal, called Grande Armée, is a six-year CDO referenced to 45 loans, according to an SG offical. The Lehman Brothers transaction, dubbed Sprint 2001-4, is a seven-year arbitrage deal structured on a portfolio of credit default swaps referenced to 100 corporates. Officials at Lehman declined all comment.

Credit Lyonnais in Hong Kong is structuring an equity-linked note whose performance is linked to China's B-share market, a structure the firm believes is the first of its kind. Due to regulatory constraints, this structure provides local investors with an easier way to access the B-share market, according to Vishal Tourani, equity derivatives analyst at CL in Hong Kong. "We're aggressively promoting the product," he added.

Bundesland Nordrhein-Westfalen, a municipal authority in western Germany, plans to set up a medium-term note program and will use foreign exchange swaps to convert all non-euro denominated issues into the single European currency. Eckhard Helms, head of funding in Düsseldorf, said the authority has decided to widen its investor base with benchmark bonds and medium-term notes to meet its annual EUR11 billion (USD9.5 billion) funding requirement since demand for municipal debt, known as Schuldscheine, has plummeted. Helms envisages the bonds will be denominated in euros but the MTNs could be in any currency. Colleagues at other Bundesländer have encountered strong interest for Japanese yen-denominated MTNs, which are then converted into synthetic euro-denominated notes using foreign exchange swaps.

Two interest-rate derivative traders recently left Standard Chartered in Singapore for similar positions at other firms. Adam Moor, an interest-rate derivatives trader covering the Singapore market, has joined ABN AMRO in a similar role, covering Taiwan and Hong Kong. Moor said he moved to ABN because he was looking for a new challenge. He reports to Mack Kazi, head of interest-rate derivative trading at ABN in Singapore. ABN has no immediate plans for further hires, Kaci said.