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Implied one-month U.S. dollar/Canadian dollar vol retraced in the latter half of last week after seesawing in the middle of the week. Implied one-month vol rose as high as 6.6% just prior to the Bank of Canada announcing a 50 basis point interest rate cut on Tuesday. The cut was seen as positive for the Canadian dollar--immediately after the cut, the Canadian dollar rose to about CAD1.5375, said Ashif Jiwani, executive director, head fx options trader at CIBC World Markets in Toronto.

BNP Paribas is set to issue a EUR3.25 billion (USD3.03 billion) synthetic collateralized loan obligation in two weeks with a unique predetermined amortization schedule. Paul Mazataud, v.p. senior credit officer at Moody's Investors Service in Paris, said this is the first synthetic amortizing CLO in which the investor enters the trade knowing what the amortization schedule is likely to be. BNP Paribas is structuring the trade to achieve regulatory capital relief on the basket of loans, explained Laurent Lagorsse, asset-backed security syndicate manager at the firm in London. Lagorsse said demand for CLOs is strong right now but supply has slackened since the turn of the year.

Credit Lyonnais is preparing to offer by year-end structured equity products that pay the performance of baskets of hedge funds. Eric Debray, equity derivatives salesman in London, said the recent downturn in the U.S. equity markets is driving demand for hedge fund-like returns. However, insurance companies and pension funds are still haunted by the Long-Term Capital Management debacle in 1998, and as a result Lyonnais is pitching products featuring principal protection.

Deutsche Bank is recommending investors purchase an at-the-money forward U.S. dollar call against the Singapore dollar and finance the position by shorting a greenback/Sing dollar strangle. The strategy, known as a seagull, pays out if the Singapore dollar weakens or trades in a range against the U.S. dollar, according to Peter Redward, Asian currency strategist at Deutsche Bank in Singapore.

Credit Suisse First Boston has hired several senior staffers from J.P. Morgan Chase. Klaus Said, a senior fx official at J.P. Morgan Chase in London, has joined CSFB as global head of foreign exchange, money markets and precious metals. Previously the three areas were all dealt with in separate departments. They were put together because the products behave in similar ways and there are also cross-selling opportunities, according to a senior CSFB official in New York. Said could not be reached.

A European bank last Wednesday purchased a one-touch dollar/yen option that pays out USD20 million if the spot rate hits JPY170 in the next 12 months. One trader at a U.S. bank in London said this was the largest barrier option to trade in the last five years. Spot dollar/yen was trading close to JPY120 and 12-month implied volatility was at 13% when the deep out-of-the-money one-touch traded through the broker market.

Dresdner Kleinwort Wasserstein last week put all its cash and derivative interest rate-driven products under one roof in order to be more competitive. The new department combines interest-rate derivatives with government, agency, repo and money market trading, according to Thomas Roeder, global head of interest rates and treasury in Frankfurt.

Dresdner Kleinwort Wasserstein expects to issue within the next two months its version of a synthetic collateralized loan obligation, dubbed a Promise deal, being pushed by German state-owned bank Kreditanstalt für Wiederaufbau. Jeremy Vice, head of credit derivatives and secruitization at DrKW in London, said the transaction will be similar in size and structure to the IKB Deutsche Industriebank and HypoVereinsbank transactions that came to market late last year (DW, 12/24). The IKB deal, which was lead managed by Merrill Lynch, had a notional size of EUR2.5 billion (USD2.3 billion) and the HypoVereinsbank deal weighed in at EUR1.1 billion (notional).

Pequot Capital Management, with approximately $14 billion in assets under management, is opening offices in London and Taiwan. A spokesman confirmed the move, but declined to elaborate, according to DW sister publication Alternative Investment News.