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Waddell & Reed is buying euro-dollar bonds on the view that the euro is oversold and will recover in the next several months, according to portfolio manager Jim Cusser. Cusser, who manages some $800 million for the firm, bought into the recent Freddie Mac reference note euro-dollar tranche, buying some eight to $10 million worth of the 4.50% of '04 (Aaa/AAA). Financing this with a sale of shorter maturity CMOs, he reasons that the non-callable structure, coupled with the euro's current valuation of $0.93, will offer an excellent total return. He notes that although the paper has backed up slightly to yield 4.65%, with a Federal Reserve inclined to ease, the curve will steepen and paper will trade inside 4%.

Legg Mason Investment Advisors will sell agencies to buy $180 million in corporates and $100 million in mortgages-backed securities late in the third quarter, or fourth quarter, as the economy begins to improve. Mitchell Penn, who manages $2.7 billion for the Baltimore-based firm, believes that inventories have built up and as consumers begin purchasing again, manufacturers will begin producing. This, in conjunction with easing by the Federal Reserve, will lead to an upturn.

In a relative value play, Westwood Management Corp has been selling agencies to add another 8% in high-grade corporates in the financial and auto sectors, and upped its allocation of Yankee bonds by about 7%. Mark Freeman, who manages $500 million for the Dallas-based firm, characterizes the nearly completed strategy as a defensive one prompted by spread tightening. He is buying single-A or better corporates, and recently bought Citigroup's 4% notes of '05 (A2/A) and GMAC's 4% notes of '05. Freeman, who is overweight Yankees by about 2%, is diversifying out of the U.S. as growth slows. He especially likes European sovereigns, particularly Italy. The country has made headway with its deficit reduction and gross domestic product numbers recently came in higher than expected.

AMR Investment Services has been adding corporates on the view that MBS and ABS are currently oversold due to concerns about pre-payment risks, according to Bonnie Mitra and Pat Sporl, senior portfolio managers. Mitra, who manages a $100 million fixed-income portfolio for the Dallas firm, is trying to increase his corporate allocation by five to six percent by selling ABS and MBS. Using some of the proceeds from this reallocation, AMR recently bought into the five-year financial sector, including Wells-Fargo (Aa2/A+) and Citigroup (Aa2/AA-), both of which were offering yields of 100 basis points over Treasuries. In addition, they added some 10-year automobile paper from Ford Motor Company (A2/A) and some 30-year paper from General Motors (A2/A), both of which were yielding nearly 200 basis points over comparable Treasuries.

Agents on deals forWilliams Communications and Level 3 Communications reportedly are bumping up pricing and offering juicy up-front fees, respectively, as they try to woo buysiders already holding their share of telecom paper. While market players note that Williams and Level 3 are two of the best telecom names to be had, an oversupply of sector paper and an increasing interest in health care and food industries is sapping interest. "These are two top names with top-notch credit and they're not blowing out," said one buysider, contrasting the recent telecom credits with other big deals like Michaels Foods, Greif Brothers, Caremark, and Winn-Dixie. These deals saw institutional tranches sell out quickly as buysiders jumped to put their money to work after a slow start to the year for new issuance.

Only in Bondland would NERDS mean Not Ever Really Dead Sectors. The revenge of the NERDS, in Credit Suisse First Boston research language, is the fact old economy businesses are providing more upside to investors than new economy bonds. "We always try to do something original with our research," says CSFB high-grade credit strategy head David Goldman, adding that he just got off the phone ordering propeller beanies with the CSFB logo for an upcoming conference. "Just think of them as high-tech yamulkes," he quips.

First Union and FleetBoston last week launched syndication of a $400 million revolver HRPT Properties Trust, replacing a larger deal the pair led for the company.Wells Fargo signed on as syndication agent, Commerzbank as documentation agent, and Bank of New York as senior managing agent, according to officials at First Union. John Popeo, cfo, said the company will use the $400 million facility to replace an existing $500 million, four-year credit the company also has through Fleet and First Union that matures in 2002. Popeo declined to comment on why the company reduced the facility size. He said the company chose the banks based on the strong previous relationship they have with the company.

The European Union has given a carve out from a new withholding tax for issuers that add to benchmark issues until March 1, 2002, without being subject to the tax. The granfathering arrangement has quelled strong concerns over the fungibility of new tranches, or re-openings tied to pre-March 1, 2001 issues, but the announcement actually came after the tax had taken effect. "It isn't like they waited for the 11th hour, it was more like they corrected it sometime after midnight," says Crispin Southgate, strategist at Merrill Lynch in London.

First Union at a bank meeting last Thursday launched syndication of a $180 million senior secured credit on behalf of Quincy, Mass.-based Quincy Newspapers.Firstar Bank and Key Corporate Capital have committed to the facility as syndication and documentation agents, respectively. First Union officials said the facility comprises an $80 million revolver and a $100 million term loan. Pricing is expected at LIBOR plus 21Ž 2% and leverage is under 4.5x. Ralph Oakley, v.p. of Quincy, confirmed the structure of the deal and the arrangers, but would not elaborate further on any details surrounding the facility.

Mark Mahoney this week joins Wachovia Corp. as head of capital markets after leaving his post as president of First Union Institutional Debt Markets. He will report to John McLean, senior executive v.p. in charge of corporates services. He declined to discuss specifics regarding any expansion plans for the group. Currently, there are 450 people working in capital markets at the bank, but Mahoney would not say whether or not he would be looking to hire more. In his new position, Mahoney will be overseeing loan syndication and trading, in addition to debt and equity businesses. He will be replacing Doug Williams and J. Peter Peyton, who were co-heads of the group and are moving into risk management and merchant banking,

Some Japanese banks have been holding auctions to rid themselves of bad credits before the fourth quarter ends on March 31, according to market players. Regulatory pressure is one reason given for the sales, but the prime driver seems to be merger plans among banks. Specific names of banks involved could not be determined by press time, but some of the credits being auctioned off include Owens Corning and Finova Group. The merging banks include Industrial Bank of Japan, Fuji Bank, and Dai-Ichi Kangyo Bank, which are forming Mizuho. Officials at IBJ and DKB declined to comment. Fuji officials did not return calls.