Atteberry is looking to bring his approximately 4% in CMS-based agency floaters to at least 6%, making it roughly even with his holdings of CMT-based agency floaters. He said he will bulk up the percentage through new cash and the proceeds from agency bonds that have been called away. He said he prefers CMS-based agency floaters over CMT-based floaters because in a rising interest-rate environment swap spreads will rise to Treasuries. In addition, for the same coupon, should a market adjustment cause investors to flee to Treasuries, CMS-based yields will stay the same or rise while CMT-based yields will fall.
One example of a callable agency Atteberry owns but would not buy again due to spread tightening is a Federal Home Loan Bank of '09 bond with a monthly call option and a coupon that increases by 25 basis points every quarter for the first two years. If the bond is not called away before the two years is up, the bond becomes a 6% bullet.
Atteberry's portfolio is composed of 21% cash, 13% Treasuries, 25% agencies, 24.1% mortgages, 11.7% corporates and 1.9% in asset-backed securities, with the remainder in international bonds, common stock and convertibles. His benchmark is the Lehman Brothers Aggregate Bond Index.