French bank increases staffing and product offering.

There is a consensus view that European equities are cheap and that M&A will continue to drive the market up and keep the liquidity flowing. This rosy vision is built on the assumption that earnings will remain strong, that global growth is re-accelerating, that the risk from inflation is minimal and that interest rates are therefore likely to remain low.

Icelandic bank spreads, which had been drifting wider late last year, moved out sharply in early March.

The covered bond market is developing in a way that few could have hoped for a few years back. Everywhere there is evidence of vitality. In addition to established relatively new sectors such as Ireland and the UK, issuers from Portugal, Italy, the Netherlands, Norway, Sweden and even Turkey are expected to join in. Alex Chambers reports.

Investor demand for US commercial property-backed debt is rapidly increasing, with strong bids coming from Europe and Asia. An exciting new range of structured finance and derivatives products is on offer, but issuers and investors might be biting off more than they can chew. Kathryn Tully reports.

The UAE capital markets received a boost last month when National Bank of Abu Dhabi (NBAD) issued a Dh2.5 billion ($680 million) tier 2 convertible bond through a private placement. It is the first time this type of hybrid security has been issued in the UAE.

There has been a lot of talk about the use of computerized trading in foreign exchange. Discussions at a recent seminar in London suggest that there is real substance, not just hot air, behind the chat.

Dealers say the backlog of unconfirmed credit default swap trades has been reduced by 54% since September 2005. The New York Fed is asking for a further reduction by the end of June this year. How near is the market to having an infrastructure able to cope with massive growth and a broadening of the uses of CDS? Helen Avery reports.

French chemicals company Rhodia has announced several initiatives that will help Rhodia Energy Services optimize the value of its carbon emissions receipts, which have been generated from projects to reduce emissions at Rhodia’s plants in South Korea and Brazil. In its first hedge using carbon emission receipts, it has sold 8 million tonnes of CERs, of which 6.5 million will be sold at €15 a tonne, to be spread over 2007 and 2008.

Domestic criticisms of Deutsche Bank’s international focus have not passed it by, prompting plans to develop its business at home. But as Jürgen Fitschen, who leads the initiative, tells Philip Moore, his bank does not intend to imitate rivals’ indiscriminate wooing of medium-size companies.

Connecticut-based currency manager Tradex Capital Markets has been awarded the management of UBS’s external allocation programme for FX-only investments. Tradex will assume responsibility for portfolio construction, maintenance and manager negotiations on behalf of UBS. Steve Jury, chief investment officer at Tradex, says: “In addition to the continued growth of our conservative, low-volatility fund, Tradex aims to move aggressively into the business of building customized multi-adviser platforms for asset managers, pension funds and government institutions. The unique funding possibilities in FX allow for the creation of portable alpha strategies that can be created with very low cash requirements. The firm is researching new ideas including notes, swaps and index development that we will likely market jointly with large financial institutions. Our wealth of FX market experience allows us to assess and quantify currency managers. This edge will enable us to help investors build return and avoid the pitfalls in a difficult and developing asset class.”

Online trading platform MarketAxess plans to launch a client to multi-dealer emerging markets CDS index trading system in the second quarter. The system will be the first of its kind and Latin America-related business is likely to be prominent.

The low-key business of advancing tiny loans to the poor in developing countries is not the most obvious starting point for a new asset class on Wall Street. Microfinance has always struggled to develop because of a lack of access to financial markets. But the consistent profitability of microcredit companies is turning heads, according to Acción International, a non-profit organization that promotes small lending programmes worldwide. Its affiliates extended loans of almost $2 billion last year. “Microfinance as an industry is becoming a separate asset class for Wall Street,” says Acción International’s president, Maria Otero.

Vietnam’s stock market is roaring as speculative money chases the few listed stocks. Reform is on the way and the potential for growth is clear. Meanwhile, the market remains over-hyped, poorly regulated and lethal for the uninitiated. Chris Leahy reports.

Are hedge fund databases trustworthy...

Finance minister’s resignation leaves investors feeling cautious.

As if investment banks didn’t compete enough with each other already, London-based employees of Barclays Capital, JPMorgan and Morgan Stanley couldn’t resist the opportunity to swap pinstripes for cricket whites in the chill of February for what has been billed the City Indoor Cricket Championship, held in Docklands.

The London Stock Exchange’s shareholders clearly have a lot to gain from Nasdaq’s bid for the market, especially if, as is widely expected, the New York Stock Exchange joins in the fray and pushes up the price even further. But what, if anything, users stand to gain is far from clear.

The Chicago Mercantile Exchange has made no secret of its desire to diversify into Asia. So its agreement with the China Foreign Exchange Trade System & National Interbank Funding Centre (CFETS), China’s interbank foreign exchange and bond market, to provide electronic access to its FX and interest rate products should come as little surprise. “The signing of this agreement is a significant step in implementing our long-term Asian growth strategy,” says CME chairman Terry Duffy. “It is the result of many years of effort by Leo Melamed, our chairman emeritus, to help develop our Asian strategy as well as the contributions of other key individuals including Phupinder Gill, our president and chief operating officer, CME retired chairman Jack Sandner and president Xie Duo and his colleagues at CFETS.”

HSBC is in the vanguard of foreign banks’ invasion of China and its partnership with Bank of Communications means that it is well positioned to expand. Chris Leahy speaks to HSBC’s China chief and his counterpart at Bocom about their businesses and the way they are working together.

Corporate restructuring dominance makes GE personnel rich quarry for banks boosting leveraged finance teams.

The introduction of a covered bond law in the UK is meant to sound the death-knell of RMBS. But the traditional financing vehicle of UK mortgages still offers greater leverage, diversification and liquidity. That’s why banks such as HSBC are considering setting up both covered bond programmes and new RMBS master trusts. Louise Bowman reports.

The $67 billion AT&T/BellSouth merger catapults Evercore and Rohatyn up the league tables.

Excellent market conditions, M&A, special situations and heightened insurance activity drove record subordinated supply in the first quarter; more deals are in the pipeline.

Although the oil-rich emirate does not need other people’s money to finance big-ticket projects, it has shown an increasing appetite for project finance, reports Mark Ford in Abu Dhabi.

Three stalwarts of the European RMBS market have recently established medium-term note programmes, a sign of the cost savings that such shelf issuance can offer. ABN Amro issued a €3.9 billion partial synthetic transaction from its European Mortgage Securities Compartment vehicle, backed by loans to employees or former employees of the bank. And two non-conforming lenders have also established multi-issuance programmes: GMAC RFC has established RMAC Securities with an inaugural £1.2 billion ($2.1 billion) deal and Mortgages plc with its £575 million launch issue. The Mortgages plc platform is called Newgate Funding, and has been arranged by parent Merrill Lynch.

Spanish bank forms a joint venture with alternatives specialist Vega to cater for institutional investors.

SuperDerivatives, an option pricing, trading and risk management company, has added a glossary of funky financial terms to its website.

Some bond investors have complained for years about the lack of covenant protection in the event of M&A activity. And during the past 18 months or so the increasing number of leveraged buyouts has heightened the fears of portfolio managers. Although some bond investors are once again trying hard to push for change of control (COC) covenants, many deals have priced recently without including this feature. In certain respects it is a simple matter of supply and demand. When demand for a bond is overwhelming it is relatively easy for issuers to refuse extra covenant protection. However, with the credit cycle widely forecast to turn it is clear that the buy side is becoming more circumspect.

Every market participant has had something to gain from corporate hybrid securities. Bond fund managers have delighted in high yields; issuers have enjoyed cheap equity. Ratings agencies have been paid for their trouble, investment banks have pocketed juicy fees and traders have revelled in the volatility. But what seems a perfect fit might well fall apart at the seams in an unfolding credit downturn. This will either expose the defects in the market and destroy it or validate hybrids as an asset class.