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Nowhere is the world's oldest profession more legal than in the Netherlands where the booming sex industry pays tax, but prostitutes say they still struggle to gain the financial acceptance they need from Dutch banks. According to Reuters, Amsterdam's ladies of the night consider themselves small business entrepreneurs, and want bank accounts which show their income is not personal so that expenses like condoms and sex toys can be tax-deductible. A complaint against ING Group with the Office of Fair Treatment, claiming sexual discrimination. ING claims it's policy has never been to do business with any persons from the sex industry, as this might offend other clients in the 65 countries it operates, which might not be as liberal as the Dutch.

Richard Litchfield, portfolio manager with Allmerica Asset Management, says the firm will rotate 5%, or $50 million, of its portfolio from mortgage-backed securities (MBS) into Treasuries if the Federal Reserve cuts rates by only 25 basis points this week, which is what he anticipates. Such a small cut by the Fed means the market will continue to demand another cut in September, leading to a second refinancing wave and causing mortgages to underperform.

Bank of Oklahoma Financial Corporation, the holding company that includes the Bank's funds from Oklahoma and several other states, is considering selling $200-300 million worth of 15-year, 6.5% Fannie Mae or Freddie Mac collateralized mortgage obligation bonds in order to buy similar 5.5% CMO paper. Lee Allen, portfolio manager of $3.1 billion in taxable fixed-income, says he is concerned the low-interest-rate environment will lead to a rise in prepayments. He said if the 10-year Treasury yield stayed below 5% for the next few weeks, or if the Federal Reserve cut rates by 50 basis points this Tuesday, he would take the plunge. Last Thursday, the 10-year Treasury was yielding 4.95%. Allen uses three-year PAC CMOs as a benchmark, and says his duration is roughly 3.0 years.

Senior staff at Cygnifi, a Web-based independent derivatives services company created and spun off by J.P. Morgan last year, are considering jumping ship following the company's decision to narrow its focus a few months ago by eliminating counterparty risk management and several other services, according to market officials. The move to change the focus was due to a slowdown in business, according to one official.

Jaap Rademaker, v.p. in the structured transactions group at Deutsche Bank in London, has joined J.P. Morgan in a similar position. Rademaker will report to Bertrand des Pallieres, head of rates marketing and structuring at J.P. Morgan in London. Des Pallieres confirmed the appointment but declined further comment. Rademaker could not be reached.

Sweden-based asset manager SEB Invest plans to launch a market neutral hedge fund in Denmark, which will use interest-rate swaps, forward rate agreements, futures and listed equity options for investing and hedging. The fund will look to execute all its derivatives transactions through a prime broker which it expects to chose in the next couple of weeks, according to Niels Lorentz, institutional client salesman in Copenhagen. The most important criteria for the prime broker is to have a global reach because the fund wants access to the Japanese and U.S. markets.

Japanese corporates have started entering collars in the last month to hedge positions in the sinking Tokyo equity market in preparation for the introduction of mark-to-market accounting in September. "Before they were just buying puts, now they're buying collars," said Jim Clark, head of equity trading at UBS Warburg in Tokyo. He continued that because of low market levels, corporates are nervous and are hedging against further downside with puts. If stocks rise, the calls could be executed, but Clark said corporates are happy to unwind cross holdings at higher than current market levels, because selling the calls partly offsets the cost of buying the puts.

Bankgesellschaft Berlin placed a USD400 million private synthetic collateralized debt obligation last month. Richard Gillingham, head of credit derivatives in London, said the reference portfolio is made up of over 50 credit-default swaps on investment grade corporates in North America and Europe. The companies had an average rating of A minus. Investors bought into the five-year deal through either credit-default swaps or credit-linked notes, according to Gillingham. He declined further comment about the CDO.

J.P. Morgan has hired Stephen Stonberg, former European head of structured credit derivative products at Deutsche Bank in London. Stonberg, who had recently moved internally to take a senior position marketing fixed income products to Deutsche Bank's private banking clients, resigned last week and is expected to take a global position in repackaging and structuring credit at J.P. Morgan, in London, according to a market official. Stonberg and officials at J.P. Morgan declined all comment.

Baltimore-based commercial bank All First, a subsidiary of First Maryland Bancorp, is looking to enter U.S. dollar interest-rate swaps by year-end to hedge the interest-rate exposure on its USD4 billion liability portfolio. The bank has not used derivatives since the beginning of the year because the introduction of the Financial Accounting Standards Board's rule 133 has deterred it and other end users concerned that being required to mark derivatives positions to market will introduce volatility in the earnings statement.

Credit default protection tightened on auto names last week on the back of increased demand for auto paper. "People feel that the auto sector is a safe place to put money," said a credit derivatives trader in New York, adding that auto paper offers relatively high returns for its credit rating. The most actively traded name was General Motors Acceptance Corp, a subsidiary of General Motors Corp. Traders in the U.S. said five-year credit default protection on GMAC came in five basis points from 66bps-71bps last week. A trader noted that while a number of corporates were buying protection, much of the action took place in the interbank market. Traders predicted GMAC will continue to tighten in the coming weeks, and could punch through the 60bps level. One trader estimated USD100-200 million of credit protection on GMAC was bought last week.