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Credit Agricole Indosuez Asset Management will reduce its exposure to U.S. Treasuries by 10% of its global fixed-income portfolio if there are indications the U.S. economy is emerging from its doldrums. Bruno Crastes, head of global fixed income at CAI in London, says, "We think the bond market is now in a bubble and a lot a cash has moved to U.S. as protection against risk." He says a trigger for the move could be the war in Iraq or some other kind of geopolitical event. Crastes has already reduced U.S. Treasury holdings from 30% of the E6.5 billion global fixed-income portfolio, to 20%, because he believes Treasuries have become too expensive. CAI has positions at the very short and very long ends of the curve, and those are the positions Crastes has been selling.

If this year's Loan Syndications and Trading Association conference is anything like last year's, there will be deep discussions on settlement, arguments on assignment fees and ... traders dancing at the podium.

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.

Westwood Management Corp. will move about 10% of its portfolio out of Treasuries and into corporate bonds between now and the end of the year in a bid to increase yield at a time when corporate spreads are close to historically wide levels. Mark Freeman, portfolio manager of $850 million, says the firm will also reallocate its Treasury portfolio by selling two- to 10-year Treasury notes and buying longer and shorter dated paper to prepare for a flattening of the Treasury yield curve.

Pat Moon, portfolio manager at Meridian Investment Managers, says he will swap 10% of the firm's portfolio, or $10 million, from Treasuries to investment-grade corporates, as corporates spreads are bound to tighten with the economic recovery. Moon reasons that some corporate names have seen their spreads over comparable Treasuries widen more than what is justified by their fundamentals, simply because "we are in a very unusual environment" characterized by corporate scandals and geopolitical tensions. He says that a year from now, providing economic conditions remain stable, corporate spreads could tighten by 100 basis points and the 10-year Treasury yield, rise to 4.50-5%.

Robert Hoffman has left Morgan Stanley where he was the firm's senior asset-backed securities banker specializing in rate reduction bond deals, according to an individual at the firm. Hoffman reported to Gail McDonnell, managing director and head of ABS finance. McDonnell did not return repeated calls seeking comment on the bank's plans to replace Hoffman or the reason for Hoffman's departure. Hoffman could not be reached for comment. A banker at Morgan Stanley says that Jack Kattan, v.p., also an ABS banker in McDonnell's group, would be filling in for Hoffman, but it remains unclear whether he would do so on a permanent or temporary basis. An ABS analyst outside the firm confirmed that Kattan is the de facto banker in charge of rate reduction transactions for the firm. Kattan declined to comment.

Bankers are eyeing the $1 billion bond issuance for Dex Media East-the first part of the acquisition of Qwest Communications International's directories business-as an indicator for the prospective waterfall of leveraged buyouts coming to market this quarter. Although the bank market seems robust enough, questions are being raised over the depth of the bond market. Investors said the directory deal, one of the strongest contenders and a frontrunner for a slew of other financings, should clear the bank market, albeit with a 1/2% flex up to LIBOR plus 4% and a discount. But the bond market could prove tougher for this deal and others, leaving bankers uncertain whether there will be a resurgence for the battered LBO sector.

Rural/Metro Corporation has amended and extended its unsecured $152 million term loan in order to bring the company into full compliance with its covenants. After a series of six extensions to a March 2000 waiver, the company and its lenders, led by Wachovia Bank, established an amendment setting more manageable provisions, said John Banas, senior v.p. and general counsel.

Arch Coal has seen its bank group shift radically as a greater portion of a $675 million credit facility for its subsidiary, Arch Western Resources, came from institutional lenders. According toJames Florczak, treasurer, about 12-15 of the 30-40 syndicate members were institutions when the subsidiary secured its original term loan in 1998. This time around, however, there are about 12-13 banks in the 40- to 50-member syndicate, he noted. "The proportion has totally inverted," he said, explaining that fewer banks are looking to invest in the natural resources sector and institutions have picked up the slack.

Royal Bank of Scotland is seeking to hire a European high-yield trader for its London office, says an official familiar with the search. The position is newly created and the trader will report to Stuart Booth, head of structured credit. Booth could not be reached for comment. Although many other firms are scaling back in high yield, RBS is hiring because it has a small team in place and wants to maintain its presence until the market pulls out of this quiet period, notes the official. Nick Coates heads up RBS' high-yield origination effort and the firm also has three analysts covering the asset class.

The 25% loss recently reported by hedge fund manager Beacon Hill Asset Management was a result of a series of duration bets gone awry, according to several mortgage-backed securities professionals who have traded with the hedge fund. In short, the fund had structured a leveraged bet that interest rates would not continue to drop; when rates continued to decline, the fund was stuck with a large short position in the 10-year note, the primary beneficiary of the rate rally. Beacon Hill's CIO, Tom Daniels, referred questions to Wallach and Associates, who did not provide comments by press time.

TD Securities has hired Donald Noe to the new position of head of global research, supporting portfolio management teams in the U.S., Canada, Europe and Asia, according to Derrick Herndon, New York-based portfolio manager at the firm. Herndon says the hire is part of an effort begun firm-wide roughly a year ago to actively manage the firms' credit portfolios. Noe was a senior managing director at Moody's Investors Service, but resigned in May 2001. He could not be reached, and his reporting responsibilities could not be determined.