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Marty Margolis, portfolio manager with Public Financial Management, says he will rotate his firm's short and intermediate fund by 8%, or $200 million, from agencies into Treasuries. The reason for the move, he says, is because agency bonds in the less than two-year maturity range have seen their spreads over Treasuries tighten by eight to 10 basis points during the second quarter, which makes them eligible for liquidation as spreads are bound to widen, he says.

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.

Cavanaugh Capital Management is considering shortening duration by selling U.S. agency debentures and adding mortgage-backed and corporate bonds in two- to five-year maturities. Jim Dugan, portfolio manager overseeing $400 million in taxable fixed income, says the firm will seek to reduce its agency exposure by 6-8% in its $80 million core composite portfolio. The 3.9-year duration of the core composite portfolio is slightly short its bogey, the 4.32-year Lehman Brothers aggregate index. Dugan says the firm may look to bring duration down to 3.5 years. It will begin buying once 10-year Treasury yields show signs of stability. Last Monday, they were at 4.85%--representing a drop of 16 basis points in five days. Dugan says the firm is not looking for an absolute level before investing, but it will continue to wait as long as such a rate of appreciation for Treasuries persists.

Investec Asset Management is ramping up its allocation to European high-yield bonds. "With a reasonably sanguine outlook for economic growth, there is significant space for high-yield to perform," says Michael Markham, London-based head of credit, who manages $600 million in spread product. The firm has been actively buying, in an effort to buy names set to benefit from an economic recovery, except telcos. It recently bought Sanitec's new issue on the view the company, which manufactures bathroom fixtures, will benefit from a pick-up in general house building. Investec is also considering Kronos, which makes titantium oxide--the essential ingredient in white paint, and Herbalife, a vitamins and healthcare products company.

Roughly $80 million of Comdisco bank debt was believed to have traded out of Morgan Stanley at the 82 3/8 - 83 level last week. Traders said the bank won an auction that occurred on June 14 and promptly placed the paper with an undisclosed buyer or buyers. A Morgan Stanley spokeswoman declined to comment.

J.P. Morgan and Salomon Smith Barney are preparing a bank facility for Swift & Co--the name given to the ConAgra Foods' beef and pork processing business, the majority of which was acquired by Hicks, Muse, Tate & Furst in a $1.4 billion deal last month. The credit is said to include a $200 million "B" term loan, but pricing, timing of the launch and other tranches could not be ascertained. Officials at the banks and a ConAgra spokesman did not return calls by press time.

Tom Cornacchia, a veteran mortgage-backed securities salesman at Credit Suisse First Boston, left the firm early last week to join Goldman Sachs. An ex-CSFB individual says Cornacchia covered some of the more active managers in the MBS market, including Clinton Group and WAMCO, and was considered a "big producer." He reported to Tom Guba, head of structured product sales at CSFB, who was traveling last Friday and unavailable to comment. A call to John Sobol, head of MBS at Goldman Sachs, was not returned at press time.

Pension fund and endowment investment in distressed debt in 2002 is far ahead of previous years as funds are placing money in one of the few areas offering attractive returns. In the first six months of this year, there have been eight completed searches resulting in 13 mandates, according to Loan Market Week andiisearches.com . By comparison, there were only two completed searches over the same period last year, and just nine searches completed in all of 2001. Furthermore, the distressed debt market should maintain its momentum in the second half of this year with three additional searches in progress and one more likely to begin shortly.

Goldman Sachs and J.P. Morgan filled the eight-year, $305 million "B" term loan for Berry Plastics at a comparatively tight spread of LIBOR plus 3 1/4 % last week. In fact, the "B" piece was well oversubscribed, with a number of new investors piling into the deal, according to one banker. She noted that it is still too early to say whether pricing on the deal will be flexed. Calls to Goldman and J.P. Morgan officials were not returned.

Graham Packaging's new $700 million credit facility and proposed $100 million offering of senior secured notes have garnered speculative-grade ratings as both Standard & Poor's andMoody's Investors Service are pinning weight on the company's planned initial public offering. S&P has assigned a B rating to the credit facility and a CCC+ rating to the notes, while Moody's has assigned corresponding ratings of B2 to the credit and Caa1 to the notes.

UBS Warburg has altered the structure of its financing package for Herbalife International, upsizing the bond portion from $220 million to $250 million. In addition, the $165 million 'B' term loan will be reduced by $5 million and $17 million in mezzanine financing will be shelved. One banker said a shortage of paper for the consumer products sector in Europe is spurring on the $100 million Euro-denominated bond piece. A Herbalife spokesman could not confirm details by press time. UBS officials declined to comment.