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Predicting a 5-5.5% unemployment rate by year-end, Furman Selz Capital Management plans to sell 5-8% of his (or $80-130 million) two- to three-year government bonds exposure and buy in the seven- to ten-year range, according to portfolio manager Alan Segars. Segars, who helps manage the firms $1.6 billion fixed-income account, is doing this to increase the duration of its portfolio from 3.7-3.8 to about 4.0 years. He expects the Federal Reserve Board to cut another 50 basis points at its meeting tomorrow, and eventually take rates under 4% before year-end. "There's typically a lag between a fall-off in consumer confidence and a fall-off in consumption...As initial claims rise and unemployment goes up, people will start altering their buying plans." Segars' accounts are benchmarked against the Lehman Brothers Intermediate Government Corporate Bond Index.

The Kansas City Life Insurance Company in Kansas City, Missouri, is looking to add up to $50 million in healthcare debt. Scott Stone, head of the firm's $2.2 billion taxable fixed income portfolio, says congressional cutbacks to Medicare over the last three years bankrupted several healthcare providers, but the survivors of the cuts have come back stronger. That, combined with an aging baby-boomer population, makes healthcare look like a promising sector, and he'll be looking to buy high-rated junk to investment grade debt. Stone declines to discuss specific companies or credits, and says that his sector shifts are typically no more than a few million dollars in size. He declined to specify what would trigger his move, or why it will be bigger than previous reallocations.

Loomis Sayles & Company is planning on rotating $200-400 million from investment-grade corporate bonds into MBS to capture the next big spread product move, says portfolio manager Curt Mitchell. He is waiting for single-A corporate 10-year swap spreads to tighten from 80 basis points off treasuries to the 70 basis point level before firing up the move.

The Deal Roll-off Chart, provided by Capital DATA Loanware, lists the 50 largest leveraged credit facilities in the U.S. market that are due to mature in the coming month. It is designed to provide a look at potentially available money in the market as credits are renewed or retired.

The economy's response to both fiscal and monetary stimulus will lead to a rebound in equities and a backup in bond yields, making this a good time to play cyclical credits, argues Dan Portanova, portfolio manager with GroupAMA Asset Management. Portanova, manager of the firm's $700 million fixed-income account, employing a "get in early" style of investing, has recently participated in the Lehman Brothers Holdings and Morgan Stanley Dean Witter bond offerings. He bought the Lehman Brothers 6 1/4% notes of '06 (A2/A) because he sees them as a pure play on the presumed rebound of the institutional trading and sales business. He bought the Morgan Stanley Dean Witter 6 3/4% notes of '11 (Aa3/AA-) not only for the strength of its institutional businesses, but its diversity of earnings streams, including advisory and asset management services.

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.

The buyside in general sees the efforts to cut/waive assignment fees as a positive step, but still a few dozens steps away from the promised land. Roughly 60% of respondents said moves to alleviate the assignment fee burden have helped the market, noting that lopping off fees can make smaller trades more economical and investors tend to gravitate toward the players that will waive fees. But a large part of the "yes" group gave a qualified endorsement.

Sixty-nine percent of fund managers agree that consolidation has had a negative effect on the market this year, but responses indicated that they think this in varying degrees. The general consensus was that consolidation has placed the power of the market in the hands of a few banks. One manager went so far as to describe the market as an oligopoly. With bigger banks grabbing more of the market, "The survivors are taking advantage of their growing strength," said one manager, not specifying just how it is they're doing this. That power shift, some said, has taken some of the aggressiveness out of the market. "Banks are less aggressive in general," one respondent said. "Investors have [fewer] options, so suspect banks are able to take more out of trades. You get the sense there's more complacency."

Samsung Life Insurance, one of the largest insurance companies in Korea, recently purchased a credit-linked note from Deutsche Bank in Seoul. The USD30 million note is believed to have been structured by Deutsche Bank's Hong Kong office via a special purpose vehicle, according to a trader in Seoul. Further details of the transaction could not be determined by press time, but the trader noted this type of transaction is unusual in the Korean market. Officials at Samsung Life and Deutsche Bank declined all comment.

Spread levels of five-year protection on Cendant Corp. tightened considerably last week in response to the success of the company's USD800 million convertible bond issuance. Before last Monday's issue, spreads on New York-based Cendant were at around 230/260 basis points, according to Greg Rosen, director, credit derivatives trader at Credit Suisse First Boston in New York. After Cendent tapped the market those levels narrowed by about 65bps, and by the day's end they were trading at 180/210 bps. On Wednesday, default spread levels were holding steady at 180/200bps, said Rosen.

Investment trust corporations (ITCs) in Korea are expected to jump into the country's interest-rate swap market soon, after getting the green light to transact April 24 from the Financial Supervisory Service (FSS), according to swappers and asset managers in Seoul. Traders said ITCs, some of which have up to KRW5 trillion (USD3.8 billion) in bond portfolios, will start using swaps as early as next month. Market officials said although Korean insurance companies and local banks already use the OTC swap market, the regulator had previously barred ITCs because of their lower credit ratings.