Breazeale is looking to raise his portfolio's investment in Treasury bills of longer than 10 years from 6% to 20%. The manager may finance the expansion with the fund's 10% cash holdings or sell $10-15 million of short-term Treasuries.
The Palm Beach Gardens, Fla.-based fund is composed entirely of Treasuries and Treasury equivalents. Breazeale is looking to go long because he believes yields on bonds longer than 10 years will shrink during the next six months.
The fund is capped at 20% of its assets in Treasury bills longer than 10 years and 40% of Treasuries of one to 10 years. The rest of the fund is made up of Treasuries that mature in less than one year. Breazeale uses three-month Treasuries as a benchmark.
The move marks a shift away from shorter maturities. Before July, the fund was entirely invested in notes with an average maturity of nine months. He reinvested in longer-term bonds in July because even before the Federal Reserve had started to raise interest rates, yields for the market had started to rise. Breazeale has adapted some indicators typically used to evaluate equities to tell him when to buy and sell bonds. He said he likes the '16s and '31s so much because, coupled with these adapted indicators, they give him the best indication of the market's direction.