Segall, Bryant & Hamill Investment Counsel plans to add $10 million of taxable municipals in lieu of agencies. Greg Hosbein, portfolio manager of $1.3 billion in taxable fixed income in Chicago, said he is also focusing on adding another $10 million in short-and intermediate-term corporates. Hosbein said he expects the Treasury yield curve to flatten and the corporate credit curve to steepen in the coming months.
For example, he recently bought Waste Management's eight-year notes at around 110 basis points over Treasuries, which is around where the company's 10-year notes also trade.
Hosbein said he would use new cash and sell some short-term corporates that become eligible for the money market funds to add new corporates to his portfolio. The money manager's benchmark is the Lehman Brothers Aggregate Bond Index. The portfolio's duration is 4.4 years against the benchmark's 4.75 years. He is overweight on corporates with a 42% allocation, underweight in Treasuries and agencies with 10% and 5%, respectively. Hosbein is a little underweight in mortgage-backed securities with 35% of the portfolio in the sector. The portfolio has a 4% allocation to asset-backed securities against the benchmark's 1%.