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Canadian Wheat Board has sold a 10-year yen trade that pays interest semi-annually. The non-syndicated ¥500 million ($4.27 million) pays a final coupon of 2%. The trade will be issued on February 15 and will be the issuer's third 10-year yen trade of 2001. It has already issued one ¥500 million note that pays a final coupon of 1.5% and a ¥600 million trade that pays a final coupon of 2%.

Marketing will start on Monday for a Eu725m performing MBS issue by Italian mortgage bank Italfondiario. RBS Financial Markets is arranger and will lead manage the deal jointly with Deutsche Bank. Palazzo Finance will be the largest ever Italian MBS issue, with a pool split 75-25 between residential and commercial mortgages. It will offer four tranches of FRNs, of which two will be rated triple-A by Fitch and Standard & Poor's.

Merrill Lynch this week securitised a state backed loan it made to Italian railway operator Treno Alta Velocit (TAV), with the Eu400m debut issue from Cartesio Srl, the bank's new asset backed medium term note programme. Marketing has already started for the second issue, a Eu1bn deal backed by healthcare receivables paid to the Region of Lazio by the Italian government.

Strong market appetite for European residential MBS helped Italian bank Bipop-Carire's Eu590m first public securitisation. ABN Amro was bookrunner. Upgrade SpA was backed by performing first lien residential mortgages originated by Bipop and its subsidiary Fineco Banca.

Despite increased pessimism and downgrades of several collateralised debt obligations, several European arbitrage deals are expected to close this quarter -including the first ever sterling arbitrage vehicle next week. UK-based Prudential M&G is preparing to issue £313m of notes with Panther CDO BV, via Morgan Stanley Dean Witter.

Salomon Smith Barney has created a global interest-rate and derivatives products group to put trading under the same roof as structuring to enable the departments to leverage off each other.

A raft of Australian investment management companies, including Royal Sun Alliance and Tyndall Australia, are on the verge of using their first domestic interest-rate swaps. Others, such as BT Funds Management, expect to increase their use of the product. Standard bond indices in the region are shifting to include more floating rate paper, making fund managers keen to better manipulate maturity and yields on corporate bonds in their portfolios.

Five-year protection on Bank of America fell from 79bps in the beginning of December to 70bps (with restructuring) early last week. Bank of America announced early last week it had met reduced earnings expectations for the fourth quarter. It also priced USD3 billion 10-year, fixed rate subordinated note, which was well received in the market, giving protection sellers more confidence in the name. BofA and other financials widened last month as they reduced earnings expectations and players feared a slowing economy would influence the ability of borrowers to pay down loans.

Market makers expect highly rated corporates to flood into the credit derivatives market as both end users and market makers if the proposed Basel Capital Adequacy Accord comes into effect.

Bank of America plans to hire credit derivatives traders, structures and marketers for its London office. Paul van der Maas, managing director and head of structured credit products and emerging market structured products for Europe in London, said the bank wants to hire six individuals to support its growing credit derivatives, emerging market structured products and collateralized debt obligation business.

ProFunds, a mutual fund manager with some USD2 billion under management, is today launching a group of index funds that will use over-the-counter equity derivatives. The funds are expected to bring in USD2 billion in the next six months, said Michael Sapir, chairman and ceo at ProFund Advisors in Bethesda, Md.

Dollar/yen one-month implied volatility jumped to 13.4% on Wednesday from 11.25% the previous Friday after the dollar appreciated to JPY118 and traders purchased dollar calls.