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Fifth Third Investment Advisors is planning to rotate $450 million from agencies (one- to three-year Fannie Mae and Freddie Mac paper) into a combination of corporate and MBS, says portfolio manager Mitch Stapley. In spite of the equity market downturn, the portfolio manager believes that the 4.3% unemployment rate reflects a strong job market, affecting select segments of the economy, such as telecoms, but has not had a negative effect on the broader service oriented aspects of the economy.

D.B. Fitzpatrick will be shortening the overall portfolio duration to index neutral by quarter-end, on the view that the effect of further interest rate cuts will be confined to the shorter end of the curve, says Brian McGrath, portfolio manager at the Boise, Idaho-based investment firm. McGrath, who manages a $200 million Treasuries and agency portfolio, will not change his current allocation, but move instead from intermediate range to short term.

Value Line Investment Management is buying the newly issued subordinated 10-year Fannie Mae (Aa2AA) and Freddie Mac (Aa2/AA) bonds on the view that their recent spread-widening was overdone. Bruce Alston, portfolio manager in New York, stocked up on the subordinated debentures from the GSEs at 33 basis points off the 10-year Treasury bond, reckoning he would reverse the trade at 20 basis points. He declined to reveal the amounts. Another program he recently executed was buying 6% conventional pass-throughs for yield-enhancement purposes, as they were trading at the $99 level. This brought his mortgage allocation up to 35% from 33%, a move of $18 million.

Some sellside banking analysts are raising eyebrows at Bank One Corp.'s (Aa3/A) acquisition last week of Wachovia Corp.'s $8 billion portfolio of consumer credit card receivables. They argue that the threat of an extended economic slump could lead to widespread customer default. Also cited as a risk is the bank's already substantial credit card exposure, through credit-card issuer First USA, which has been struggling and has yet to show clear signs of a turnaround, they add. A Bank One spokesman declined comment.

Emmis Communications hit 100 and Young Broadcasting traded at 100.75 last week, a note of strength for two credits in a weakening sector. Dealers said the trades were at $5 million each. "Broadcasting is softer in general, but the asset value is keeping the paper from softening further for now," a trader observed.

The automotive industry is seeing a slight resurgence, despite talk that the sector is at the mercy of a weakening economy. A handful of auto credits traded up last week, dealers reported. Hayes Lemmerz is trading at 87, up from the low 80s. A $5 million piece of Tenneco Automotive's bank debt traded in the 75-76 range, from the low 70s. JL French's debt is trading in the low 80s. "Numbers are coming from Ford, General Motors, and Daimler Chrysler which are higher than people expected," a dealer said. Another trader agreed. "Expectations for car sales are better," he said.

A $15 million piece of On Semiconductor's bank debt traded in the 87 1/2-88 1/2 range, down from 90. Dealers attribute the dip to general weakness in the sector, but expect levels will remain steady. "It's found its level and should trade back up," said a trader.

Pennsauken, New Jersey-based PrimeSource Corporation, a supplier to the printing and publishing business, refinanced its existing $75 million credit with PNC Capital Markets early this month as the company's outstanding loan was set to mature this May. William De Marco, cfo, said the company's new facility will replace the last one, signed in 1996, and participants also include Mellon Bank, First Union, FleetBoston Financial and National City Bank.

Gary Katcher has resigned from his position as head high-yield trader at RBC Dominion Securities in New York. He declined comment on why he left, other than to say he feels like taking a break from the business. The junk bond veteran, who has worked for Bear Stearns and Merrill Lynch, says, "I left of my own free will. Those guys are definitely making a go of it and I wish them the best." Katcher believes RBC has promoted Salvator Abbatiello to fill his position, but Abbatiello could not be reached for comment as BW went to press.

Several telecom names continue to feel the heat of market saturation and a weak high-yield sector. A total of $15 million of Winstar Communications' bank debt traded around 30 last week. Teligent is bid around 20. In December of 1999, Teligent's paper was bid at 99, and by January of this year, bids had dropped to 60. Teligent provides telephone services for companies. "The whole CLEC, long-haul service provider sector is getting beat up," a dealer said. RCN Corporation's bank debt is in the 66-72 range and 360 Networks is at 60-70. "Telecom has just fallen out of bed," a distressed dealer remarked. Spokesmen at Teligent, RCN and 360 Networks did not return calls. A spokesman at Winstar declined to comment.

F.Y.I. Incorporated went to market with a $250 million credit but ended up signing a $297.5 million deal as syndication closed oversubscribed. Lon Baugh, head of investor relations, said the credit replaces a $175 million deal due to mature next year. He said the company wanted to refinance now to ensure it would get the most favorable terms possible. "When it came to negotiations, we didn't want to be in rush mode. We didn't want to go there," he said. "We wanted to accommodate for growth and have an expansion in our capacity," he said.