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ICC Capital Management has increased the amount of duration Treasuries contribute to its fixed income portfolio by reducing duration exposure from agencies, on the view that spreads between agencies and Treasuries have tightened from last year's highs. Two weeks ago the Orlando, Fla.-based firm brought to neutral the duration of Treasuries in the portfolio at 2.05 years from 0.5 years, but also kept agency exposure high, at 2.25 years.

Advantus Capital Management has been swapping into investment-grade corporates, and out of Treasuries and pass-throughs, on the view that the market has reached the trough of the credit deterioration cycle, according to portfolio manager Wayne Schmidt.

D.L. Carlson Investment Group is in the process of selling its 10-year agency paper and buying three-year corporates on the view that the Federal Reserve is in an aggressive easing mode and the front end of the yield curve will steepen. Doug Robbins, who manages $200 million for the Concord, N.H.-based firm, declined to discuss specific credits, but says he likes finance and banking paper because it benefits from the Fed's easing policies. He believes that by mid-summer the Fed will cut rates another 100 basis points, bringing the Fed Funds rate to 4-4.5%.

Turner Investment Partners will buy two to five-year paper and sell its eight to 20-year Treasuries, STRIPs, TIPs and 6-6.5% pass-throughs in the third quarter, when it expects the economy to begin improving. Declining to comment on how much of an allocation change he will make, Jim Midanek, who manages $700 million for the firm, concedes "this will happen once the excessive easing expectations come out of the market and the market backs up across the board."

BNP Paribas, Credit Suisse First Boston, Morgan Stanley Dean Witter and Schroder Salomon Smith Barney reportedly riled up the euro swaps market last week as they prepared for a USD7-8 billion France Telecom bond issue they are lead managing. Some USD3 billion (notional) traded in the euro swaps market last week as the lead managers positioned themselves for France Telecom potentially wishing to hedge and proprietary traders attempted to front run the positions, according to a trader.

Five-year protection on DaimlerChrysler widened 20 basis points last week to 145 basis points/155bps as traders prepared for today's release of the company's results. John McEvoy, co-founder of creditex in New York, said demand for credit protection on the name spiked last week. He estimated at least twice as much protection in the name traded as in an average week, with demand originating with bank prop traders and bond holders hedging their positions.

European credit derivatives traders were advising their colleagues at German banks to take it on the chin as the financial crisis in Turkey unfolded last week. German banks, including Deutsche Bank, Commerzbank and Dresdner Bank, are believed to have huge basis risk on commercial loans they have extended to Turkish banks, which they have imperfectly hedged by purchasing credit default protection on Turkish sovereigns. "Sit on it and pray," said a trader at a U.S. bank in London. He noted that if the Turkish banks default without an accompanying sovereign credit event, the German banks could be left with substantial losses. Officials at the three banks declined comment.

Paul Croft, chief operating officer of global markets, Japan at Deutsche Bank in Tokyo, has resigned. Croft said he is stepping down to support his wife's business interests in California. He declined to comment on who would be replacing him, but noted that he would remain at the bank for a while to ensure a smooth transition for his successor.

Fortis Bank plans to buy a two-year knock-in put to structure a knock-in reverse convertible linked to shares of Royal Dutch. Leen Verdonk, derivatives salesman in Amsterdam, said the EUR50 million (USD45.73 million) put will be struck at a value equal to the stock's price at Wednesday's close. The knock-in level will be 10% below the strike. Royal Dutch shares opened at EUR66.46 last Monday.