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The post-holiday slumber is wearing off and market activity is starting to pick up. A $5 million piece of Voicestream's "A" tranche traded at 97 _, and Nextel's "B/C" tranche traded at par plus 1/4.

A task force for the derivatives implementation group of the Financial Accounting Standards Board is likely to offer relief to corporates concerned about the tax treatment for hedging floating interest-rate exposure on commercial paper programs under the FASB's statement 133. Statement 133 requires derivatives to be recognized on the balance sheet at fair value. A task force for the derivatives implementation group is leaning toward allowing hedge accounting treatment for hedges on the LIBOR component of commercial paper programs, according to several members of the derivatives implementation group. Issuers likely will be able to match swaps to the program as a whole, rather than being forced to match swaps to individual issues.

Prices for five-year protection on automobile names rose last week following an announcement by units of General Motors of planned multi-billion dollar bond issuances, which were expected to be priced after DW went to press Thursday. The announcement of the issuance on Tuesday caused five-year protection for General Motors Acceptance Corp. to trade early Wednesday at 98 basis points, up from 89 bps at the beginning of Tuesday, according to Marius Maldutis, v.p. and credit derivatives trader at Morgan Stanley Dean Witter in New York. GMAC is expected to issue USD2-3 billion in five-year notes, and GM is expected to issue USD1 billion in 10- year notes, according to a GM spokeswoman in New York. Ford Motor levels widened as well, with five-year protection with restructuring trading on Wednesday at 100 basis points, up from 90bps the day before. Ford is also expected to issue debt later this quarter.

BNP Paribas is planning this summer to set up a weather derivatives desk in New York. Denis Autier, head of global risk solutions in London, said the bank already trades weather contracts from Europe but wants to have a physical presence in the U.S. The bank set up its weather derivatives operation in May. It first traded weather from Europe because its insurance risk team is based there. Autier said the head of the department and headcount have not been finalized yet. The desk will also deal with other alternative risk transfer products, such as insurance-related products.

Credit Lyonnais has hired Tony Wong, a foreign exchange sales professional at BNP Paribas in Hong Kong, to the new position of v.p. interest-rate derivatives sales and marketing for Hong Kong. Wong starts today and reports to Frédéric Truchot, head of derivatives sales in Hong Kong, according to Frédéric Lainé, Asia regional manager, interest-rate derivatives products in Hong Kong. The hire expands the bank's Hong Kong interest-rate sales and marketing team to three, he noted. Credit Lyonnais has been planning to expand its Hong Kong interest-rate derivatives team for some time to take advantage of growth in Asia's interest-rate market, Lainé said. Further hires are possible by the second quarter or second half, provided the market continues to grow, he continued.

Credit Suisse First Boston is recommending that clients buy one-year dollar puts against a basket of currencies containing euro, Swiss franc, sterling, Australian, Canadian and New Zealand dollars. Kevin Chang, foreign exchange strategist in London, said it is recommending this trade because the bank expects the dollar to depreciate against the basket of currencies as the U.S. economy slows down. National Association of Purchasing Management manufacturing survey data released last week suggests the weakening is likely to continue, as the economy slows and interest rates fall. CSFB is pitching the strategy with a maturity of between six months and one year because it believes there is room for a short-term correction in the dollar's recent weakening against the euro. CSFB forecasts euro/dollar at above parity, dollar/Swiss franc at CHF1.56, cable at USD1.45, dollar/Aussie at USD0.60, dollar/Canada at CAD1.45 and dollar/New Zealand at USD0.48 in 12-months.

Forward rates are derived from the interest rate swaps curve and represent the cost of borrowing the currency for six months at a future date represented by the maturity on the horizontal axis. Implied vols are derived from cap prices. Data supplied by Chase Manhattan Bank and Chase Securities.

Introduction

European insurance companies and pension funds were last week snapping up multi-callable notes to boost yields in anticipation of a further round of interest rate cuts. Deutsche Bank, J.P. Morgan and Morgan Stanley Dean Witter are heavily involved in structuring and marketing the notes. Multi-callable notes are attractive in a falling interest-rate environment because they pay a juiced-up yield. In return investors run the risk that the issuer will call the bonds. "It will be a frantic year for these products as insurance companies position themselves for a low interest-rate environment," said a derivatives professional at Crédit Agricole Indosuez. An interest-rate derivatives trader at a German bank in Frankfurt estimated that volumes shot up to EUR300 million (USD285 million) in the last week from a third of that at the end of last year.

Iccrea Banca has bought a one-year EUR1.4 million (USD1.3 million) knock-in put on shares of Mediaset to structure a reverse convertible linked to shares in the Italian television company. Banca di Credito Cooperativo bought the reverse convertible. Francesco Polimeni, head of derivatives trading at Iccrea Banca, said the put is struck at EUR14.14, the stock's closing price on Dec. 11, and knocks in at EUR11.31, or 80% of the strike level. The coupon is 10.20%. Polimeni said BCC asked Iccrea Banca to link the reverse convertible to Mediaset. This was probably because BCC wanted exposure to this company and with relatively high one-year volatility on shares in Mediaset, selling puts offered an attractive coupon, according to Polimeni. He added that it may have wanted exposure to the company now because its loans to Mediaset had expired.