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UBS Warburg has added structured credit products to its credit derivatives trading operation and plans to make additional hires to boost the effort. Hugh Evans, managing director and co-head of global credit derivatives trading in London, said the trading department priced its first synthetic CDO last week. The hire is part of an ongoing effort to beef up the department, which started in March. Evans plans to hire another five to 10 structurers and traders in London, Stamford, Conn., and Tokyo within the next 12 months.

Due to weaker than expected recent economic numbers,Groupama Asset Management has begun to swap 15%, or $45 million, of its portfolio out of corporate bonds into Treasuries and will pursue this strategy over the next two months, says portfolio manager Dan Portanova.

The Texas Permanent School Fund has been taking profits in financial services industry paper as spreads have narrowed in response to the Federal Reserve Board's easing of interest rates. Carlos Veintemilles, who manages $4.5 billion for the $7 billion fixed-income fund, says he has sold $20-25 million each in names including Bank One, Wells Fargo and Bank of America. The Bank One 7.12% notes of '11 (A1/A-) traded at 173 basis points over Treasuries on March 23, and came in to 129 over on July 27 before he sold them. The Bank of America 6% of '09 (AA3/A) followed a similar trajectory, going from 180 to 137 in the same time frame. Veintemilles says the fund is currently keeping the assets raised from the sales in cash.

Nowhere is the world's oldest profession more legal than in the Netherlands where the booming sex industry pays tax, but prostitutes say they still struggle to gain the financial acceptance they need from Dutch banks. According to Reuters, Amsterdam's ladies of the night consider themselves small business entrepreneurs, and want bank accounts which show their income is not personal so that expenses like condoms and sex toys can be tax-deductible. A complaint against ING Group with the Office of Fair Treatment, claiming sexual discrimination. ING claims it's policy has never been to do business with any persons from the sex industry, as this might offend other clients in the 65 countries it operates, which might not be as liberal as the Dutch.

Richard Litchfield, portfolio manager with Allmerica Asset Management, says the firm will rotate 5%, or $50 million, of its portfolio from mortgage-backed securities (MBS) into Treasuries if the Federal Reserve cuts rates by only 25 basis points this week, which is what he anticipates. Such a small cut by the Fed means the market will continue to demand another cut in September, leading to a second refinancing wave and causing mortgages to underperform.

Bank of Oklahoma Financial Corporation, the holding company that includes the Bank's funds from Oklahoma and several other states, is considering selling $200-300 million worth of 15-year, 6.5% Fannie Mae or Freddie Mac collateralized mortgage obligation bonds in order to buy similar 5.5% CMO paper. Lee Allen, portfolio manager of $3.1 billion in taxable fixed-income, says he is concerned the low-interest-rate environment will lead to a rise in prepayments. He said if the 10-year Treasury yield stayed below 5% for the next few weeks, or if the Federal Reserve cut rates by 50 basis points this Tuesday, he would take the plunge. Last Thursday, the 10-year Treasury was yielding 4.95%. Allen uses three-year PAC CMOs as a benchmark, and says his duration is roughly 3.0 years.

Standard & Poor's will release the first ever collateralized loan obligation performance index to the market next week, just ahead of a similar index to be offered by Moody's Investors Service. Both agencies are launching indexes in an effort to respond to investor demand for more transparency on deals and information comparing asset managers. The move, according to Stephen Anderberg, S&P ratings specialist, is an extension of the collateralized bond obligation index S&P already offers investors. "You're never going to have a liquid secondary market if you can't look at a deal before you invest in it," he said. Noel Kirnon, group managing director of derivatives and CMBS at Moody's, said his agency will be offering both a CBO and CLO index in the near future to compete with the S&P indexes. "We will launch our [CLO] index in a short time and it will be more comprehensive because our coverage is greater as we rate more deals," he said.

Scotia Capital, the securities arm of The Bank Of Nova Scotia, has hired former Nomura Securities International repo trading chief Keith McCluskey to build a repo trading operation in U.S. Treasury bonds. McCluskey, who will be based in New York, will report to Frank Pinon, the firms' funding and debt-markets trading chief. Pinon was unavailable for comment. McCluskey notes that although he joined the firm in mid-July, "we're just getting going now, in terms of building desk infrastructure and trading relationships."

J.P. Morgan's $400 million term loan "B" for Land O' Lakes is moving slowly, as some investors are expressing concerns over the co-operative nature of the business and what that would mean in a default scenario. There are also issues relating to the poor historical performance of the target company Purina Mills, which has filed for Chapter 11. Purina announced last week that the Securities and Exchange Commission is investigating whether traders illegally profited from Land O' Lakes proposed $360 million acquisition of St. Louis-based Purina.

Suiza Foods' $1 billion "B" term loan, which broke into the market last month, is showing its first signs of decline after holding steady at 100 1/2. The paper dropped slightly to 100 3/8 in a handful of $5 million trades, dealers said. Buyers and sellers could not be determined. Meanwhile, Dresser Equipment, another strong new credit, started to creep up.

Citizens Communications is preparing to refinance $2 billion in loans between now and October when existing lines mature. Don Armour, v.p., finance and treasurer for Citizens, said the new revolver would most likely be a multi-year backstop with the same institutions that led a $5.7 billion line arranged last year. Chase Manhattan Bank was the lead arranger on that credit, which has been downsized after a $1.7 billion note sale earlier this year and will be cut even more by a planned $1.75 billion private offering of 144A senior notes. The company is coming in with a $2 billion deal because it does not need a revolver as large as the existing facility.