Texas Manager To Shift Out Of Agency Bullets Into Callables

  • 28 Jul 2002
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Bob Smith, portfolio manager at Sage Advisory Services, says he will shift 10% of the firm's portfolio, or $100 million, from bullet to callable agencies, as he anticipates interest rates will rise early next year. The move is a defensive play: when interest rates rise, negatively convex callable debentures will decline in price less quickly than their bullet counterparts, says Smith. In addition, because interest rates are at an all-time low, selling expensive bullets and buying cheap callables makes sense. Smith will initiate the move immediately to take advantage of this arbitrage.

One example of a trade is the purchase of the five-year Federal Home Loan Bank callable bond, which is non-callable for two-years and which, last Monday, traded at 70 basis points over the curve. Another potential buy is the FHLB seven-year bond, which also has two years of call protection, and which, last Monday, traded at 80-85 basis points over Treasuries. Smith says he will avoid buying Freddie Mac or Fannie Mae debentures and may, on a case-by-case basis, consider selling their bullets. He is concerned that efforts by Congressman Richard Baker (R-La.) to reform Fannie Mae and Freddie Mac may compromise the ability of those issuers to raise money in the market.

Based in Austin, Texas, Smith manages a $1 billion portfolio. He allocates 40% to agencies, 11% to corporate financials, 10% to bonds of industrials companies, 10% to Treasuries, 6% to international corporates, 5% to collateralized mortgage obligations, 5% to asset-backed securities, 5% to agency pass-through, 4% to corporate utilities and 4% to cash. With a 3.30-year duration, the fund is shorter than its benchmark, the Lehman Brothers government/credit intermediate index, which has a 3.64-year duration.

  • 28 Jul 2002

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 13 Mar 2017
1 JPMorgan 94,925.33 384 8.39%
2 Citi 87,531.58 331 7.74%
3 Bank of America Merrill Lynch 84,341.49 288 7.46%
4 Barclays 75,288.19 241 6.66%
5 Goldman Sachs 68,504.71 208 6.06%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 14 Mar 2017
1 Bank of America Merrill Lynch 10,650.87 23 11.13%
2 Deutsche Bank 8,169.49 17 8.53%
3 HSBC 6,243.46 23 6.52%
4 Citi 4,355.35 13 4.55%
5 SG Corporate & Investment Banking 4,273.37 17 4.46%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 21 Mar 2017
1 JPMorgan 5,440.56 17 10.74%
2 Deutsche Bank 4,468.97 23 8.82%
3 UBS 3,742.72 17 7.39%
4 Citi 3,393.89 23 6.70%
5 Goldman Sachs 3,360.93 18 6.63%