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Royal Bank of Scotland Financial Markets shocked the sterling interest-rate swap market last week by reportedly snatching a chunk of swap business from co-book runner Citigroup on behalf of Welsh Water, which was looking to unwind a hedge. "There was blood in the waters," commented a senior swapper at a rival firm, noting that taking business from a co-book runner is taboo. "There is normally a gentleman's agreement," said another. Citigroup units Citibank and Schroder Salomon Smith Barney had agreed to share interest-rate swap and bond underwriting duties, respectively, with RBS, according to officials at the firms. Officials at the firms denied any bad blood on the deal.

Rabobank has hired Jean-Marc Debricon, portfolio manager for structured investments and credit derivatives at the European Bank for Reconstruction and Development, as director in the structured credit trading group in London. Mark Lauber, executive director and senior structurer at Rabobank in London, said Debricon will join the group as a structurer of both cash and synthetic credit products next Monday. Rabobank is adding this position as the structured credit products market as a whole grows. Lauber thinks the Dutch bank is in a good position to take advantage of this growth because of its AAA/Aaa rating. The hire brings the number of credit structurers in London to five. The bank also has three traders in its London office. He will report to Mark Northway, global head of structured credit trading.

James McNab, a credit derivatives trader at UBS Warburg in Singapore, will join ABN AMRO in Singapore. McNab will report to Zafar Alam, senior v.p., head of credit trading and local markets, Asia. Alam noted that McNab will soon be on board, declining to elaborate. McNab could not be reached.

Barclays plans to hire derivatives conversant investment advisors in its London private banking office. Mercedes Paratje, global head of investment advisory in New York, said the recruits will advise high-net-worth individuals on investment opportunities and strategies, including investments and hedges which use derivatives. The recruits will report to Olivier Zucker, head of investment advisory in London. Zucker said he expects the hires to be on board early next month.

Casino Guichard-Perrachon has entered an interest-rate swap to convert a EUR200 million (USD181 million) fixed coupon bond into a synthetic floater. Laurent Zecri, head of interest-rate risk management in Saint-Etienne, said in the swap the casino pays a 6% fixed rate and receives three-month Euribor plus 89 basis points. The swap mirrors the bond's size and 2008 maturity.

The University of British Columbia's CAD500 million (USD326 million) Staff Pension Plan is considering reducing its equity derivatives position and putting the proceeds into the cash market. Roger Polishak, associate treasurer, explained that the move reflects a recent decision by the Canadian government to raise the cap on foreign investments by 5% to 30% (DW, 4/30). The pension fund has a 40% allocation to non-Canadian equities with just 20% invested in the cash market and 20% in swaps and pooled funds, in order to circumvent the previous 25% cap.

Currency overlay has grown in popularity during recent years. From being an obscure and slightly risqué product it has come to be an important weapon in the institutional hedgers' arsenal. However, there is still a degree of confusion as to the precise nature of overlay, and in particular it is easily confused with currency funds, or the use of currency as an asset class.

Deutsche Bank has hired part of Citibank's equity warrants team as part of its ongoing bid to topple Citibank as the number one warrants player. Frank Langer, deputy global head of warrants at Citibank in Frankfurt, and three of his traders will join Deutsche Bank in Frankfurt at the beginning of June. The bank also plans to hire five or six sales professionals in the coming months, according to Yassine Bouhara, head of European equity derivatives at Deutsche Bank in London. Bouhara told DW in 1999 it was planning on knocking Citibank off its number one perch (DW, 4/26/99) and he believes with these hires it has gone a long way to achieving that goal.

Dresdner Kleinwort Wasserstein plans to set up a weather derivatives desk to expand its treasury risk management products by the fall. Thomas Roeder, global head of interest rates and treasury in Frankfurt, said the desk will offer weather derivatives, concentrating on marketing degree-day swaps and options to companies looking to hedge their exposure. Roeder said it is setting up the department as a response to customer requests. But he added margins are shrinking on liquid derivative products so banks are looking for new markets.

Euro/U.S. dollar implied volatility fell across the curve last week as demand to buy options dried up. Traders said the market was unusually quiet because of Golden Week in Japan, last week's May Day holiday in Europe and the run up to today's bank holiday in the U.K. One-month vol fell to 11.9% on Wednesday from 13.40% a week and a half before. Euro/dollar spot has stayed between USD0.8826 and USD0.9032 for over a month.

Dresdner Kleinwort Wasserstein is ramping up its credit, interest rate and foreign exchange derivatives capabilities in New York, and as part of this effort will opportunistically hire traders, marketers and researchers. Keith Fell, the North American head of sales and derivative marketing in the firm's global debt division in New York, said there is no timetable for the hires, but he added the bank is growing its derivatives business as part of a strategic plan to expand its global debt capabilities.