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On the view that interest rates will rise toward year-end, Mellon Private Asset Management is buying longer maturity corporate bonds in anticipation of spreads tightening on the long end of the curve, says John Poole, portfolio manager in Boston. The overall strategy complies with his goal of staying neutral his benchmark's duration, in anticipation of a greater steepening of the curve. He also says that he has been buying shorter term ABS and MBS with the same thought in mind.

Rullison & Co. will rotate 10% of its portfolio from investment grade into high-yield corporate bonds over the next six weeks, says Christopher Hayes, portfolio manager with the asset management firm in Rochester, N.Y. The manager--who favors a value investing style--believes a lot of high-yield paper has suffered due to the telecom crisis, adding to the spread-widening between investment-grade and junk bonds, and creating a lot of good buying opportunities in the lower credit range.

McGlinn Capital Management, a money manager based in Reading, Pa., is considering adding roughly $50-100 million in 15-year mortgages, and another $50-100 million in high-rated junk credits. J.P. Weaver, who manages just under $1 billion in taxable fixed income assets, plans to make the move within the next few weeks. He says he'll sell Treasuries and possibly some agencies to fund the move, though he won't specify maturities or what type of agencies. He is duration neutral to his three Lehman Brothers benchmark indices, and says he will remain neutral for now.Weaver likes 15-year MBS because it has lagged 30-year paper, and he expects bank demand for 15-year paper to pick up to reflect Federal Reserve easing. Banks tend to invest in 15-year MBS in an easing environment because it fits their liability profile, he explains.

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.

Up-front fees for pro rata tranches declined slightly to 4.7 basis points per one million dollars committed for April 2001 while institutional up-front fees remained steady at 3.1 basis points. According to Portfolio Management Data, fees on pro rata tranches for the three months ending April 2000 were 2.9 basis points and were 2.2 basis points for institutional pieces last year.

Segall, Bryant & Hamill has been reducing corporates exposure over the past several weeks by a total of 6%, or $90 million, by swapping into current coupon MBS, on the view that the refinancing wave is largely over in the mortgage sector, says portfolio manager Greg Hosbein. Hosbein, who helps manage the firm's $1.5 billion fixed-income account, says the brutal prepayment cycle of the last several months has cheapened up the 6.5% conventional mortgage sector. Another factor underlying the move is that the firm has been overweight the corporate sector for nearly three months, convinced that the Federal Reserve's aggressive easing policy would disproportionately benefit corporates. With its view that the Fed is likely to shift to a neutral stance soon, it has have begun taking some profits on unspecified credits. Hosbein does note, however, that the firm does retain positions in Masco (Baa1/BBB+), Lowes (A3/A), Household International (A2/A) and AXA Financial (A2/A-).

Karen Eltrich, an Institutional Investor-ranked high-yield food and beverage analyst, left Morgan Stanley Dean Witter in New York late last week to take a similar position at Goldman Sachs, according to market officials. It is believed she will report to Roger Gordon, head of high-yield research, though Gordon referred calls to a Goldman Sachs spokesman, who, along with an MSDW spokesperson, were unable to provide immediate comment. Eltrich could not be reached.

Buysiders say they will maintain their positions in Nextel Communications paper, at least for the short term, despite a three-to-four-point price drop in its outstanding high-yield paper last week on news of a $1 billion convertible deal. Benchmark 9 3/8%s of '11 fell from $83 before the deal was announced to $79-$80, before returning to the previous levels. Market players say the new issue raised particular concerns because it is pari passu with the high-yield debt, meaning it will not be subordinated to straight bonds, as convertibles typically are. Still, the new bond is seen giving the company another $1 billion for capital expenditure in a tight market and improving financial liquidity, which investors say balances the scales for the credit. A call to the company was not returned as of press-time.

Dealer analysts in the high-yield sector are expressing concern about the effect the Securities and Exchange Commission's Regulation FD is having on the debt market, according to BW sister publication Corporate Financing Week. They argue that junk issues have tremendous credit sensitivity due to their leverage factor, requiring a continuous stream of information to keep them at a stable price. But this information, integral for bond pricing, has slowed to a trickle under the rule, according to Michel de Kokoly Thege, v.p. and associate general counsel for the Bond Market Association in New York.

Katonah Capital is in the final stages of wrapping up a $425 million collateralized debt obligation named Katonah II Ltd. According to a source close to the deal, Katonah is in its final investing phase, looking at a variety of sectors, after it priced the notes for the vehicle in the beginning of March. The CDO is a traditional cash-flow arbitrage structure with an 85% investment in loans and a 15% investment in high-yield debt. Final close on the vehicle is expected in late July. Chase Manhattan Bank is trustee and Kohlberg & Co. is the majority equity investor. Officials at Katonah Capital declined to comment.

Moody's Investors Service has upgraded the debt ratings of Magellan Health Services Inc. to B1 from B2, citing Magellan's progress in exiting from non-core operations and completion of asset sales that improve liquidity. Columbia, Md.-based Magellan has a $100 million revolver and is the largest behavioral managed care provider in the U.S. with over three times as many covered lives as the next competitor. The company recently sold National Mentor, a community-based foster care provider, for $100 million in cash, increasing liquidity, according to Moody's.