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Five-year credit protection on Heidelberger Zement, the German cement producer, widened about 100 basis points over the last week, blowing out to 510 basis points/530bps last Wednesday from 375bps/450bps a week before. On Monday, the company announced it had cancelled plans to sell its building materials division, HBE, and on the same day Standard & Poor's downgraded the parent to BBB minus from BBB. After these negative credit events, spreads began widening to 450bps/480bps, traders said. They added that volume was low, however, since the name is so illiquid, and a few trades caused spreads to widen substantially.

Hedge fund manager Maystone Partners plans to buy credit default swaps once its Maystone Continuum Fund, a convertible-bond arbitrage fund launched last month, doubles its assets under management to USD100 million. Henry Pizzutello, managing partner in Greenwich, Conn., explained that because the typical notional size of over-the-counter credit default swaps is USD5 million, the fund wants to increase its assets under management for diversification purposes before plunging into this market.

Launching and selling a loan this past month is leading to all kinds of ailments. One loan salesman confessed to taking up smoking again during a recent syndication, whilst another has had headaches caused by a particularly troublesome credit. "We were a lot happier back then," said another banker, talking about the days when they left the office before midnight.

Chandler Asset Management is looking to shift some $20 million of its short-term U.S. agency holdings to a "butterfly" position--selling three-year debentures in favor of 1.5- and 4.5-year paper.Joe McCullough, portfolio manager of $1.3 billion in taxable fixed income, says the three-year part of the curve has often been expensive relative to 1.5- and 4.5-year maturities, and the firm will make such a "butterfly" trade in those instances. Chandler will also move $20 million out of U.S. agency debentures and into corporate credit. McCullough says the firm wants to pick up yield and position itself for an economy that is expected to improve.

This chart, provided by Citibank/Salomon Smith Barney Inc., tracks bid-ask prices for par credit facilities that trade in the secondary market. It also tracks facility amounts, ratings, pricing and maturities.

Bonnie Mitra, portfolio manager at AMR Investment Services, will rotate 8% of the firm's portfolio, or $400 million, from mortgage-backed securities into an equal mix of agencies and high-quality corporates. The move, not triggered by any particular event, is a defensive play in anticipation of rising interest rates that adversely affects extension-risk sensitive MBS, says Mitra. He predicts higher interest rates by year-end as a result of an economic recovery stimulated by a fiscal package. He also sees an end to the Treasury rally once the uncertainty over a war with Iraq is lifted and the conflict resolved. By the end of the year, the 10-year Treasury yield will increase to a 4.5-5% range, he predicts. Last Monday, the 10-year Treasury yielded 3.95%.

Investec Asset Management, a U.K. fund manager with $8.5 billion in fixed-income assets under management, has lengthened duration on its portfolios. Geoff Lunt, a London-based fund manager, says, "It's been our view for a long time that the global political situation is going to get worse, and that is indeed what has been the case over the past week. The consensus is that [U.K.] interest rates are likely going to be cut, and obviously bonds will have a premium."

Richard Cohen, head of Pacific Rim credit derivatives at Merrill Lynch in Tokyo and an industry veteran, has left the firm. He reported to Peter Walshe, head of credit products for the Pacific Rim in Tokyo. Market officials speculated that Cohen was let go as part of a global drive to reduce costs. Both Walshe and Takayuki Inoue, spokesman, declined all comment. Cohen could not be reached.

Merrill Lynch has hired Alan Galishoff, head of CMO trading and origination at JPMorgan in New York, in what is thought to be a new position as a proprietary mortgage arbitrageur. An official familiar with the move said Galishoff had been looking to shift from the client side to proprietary trading for several months. Galishoff, who was responsible for interest only/principal only (IO/PO) mortgage derivatives and collateralized mortgage obligations (CMOs) at JPMorgan, did not return calls.

Bank of America has hired Eric Ohayon, head of fx structuring at Lehman Brothers in London, to build up its fx structuring business in Europe. Ohayon said he reports to Alan Collins, head of the fx business in London. Ohayon replaces Greg Kaldor, managing director in foreign exchange sales in London, who moved over from a structuring to sales role last year, Kaldor said. Collins referred calls to Rhiannedd Jones, spokeswoman in London, who confirmed that BofA is beefing up its fx structuring presence, but declined further comment.

Crédit Agricole Indosuez is planning to double its pipeline of synthetic CDOs and bespoke tranches this year and will start marketing a USD1 billion synthetic transaction in the coming weeks. The transaction, called Momentum, will include synthetic exposure to high quality corporate names, according to Loic Fery, executive director and global head of credit derivatives and structures at CAI in London. The firm is retaining the equity tranche and offering four tranches rated between AA and BBB.