Zurich Scudder Investments, which manages £14 billion in European fixed-income assets, plans to sell off its positions in Swedish government bonds once the five-year spreads versus bunds tightens to about 40 basis points. Last week, the five-year spread versus bunds was about 60 basis points. Zurich Scudder has built up its position in Swedish government debt over the past few months. Sandra Holdsworth, London-based portfolio manager, says the firm has bought the '06 and '08 bonds recently because the currency has stabilized, the curve has not discounted potential interest-rate cuts and inflation is dropping. The firm sold Eurozone government bonds to fund the purchase. Roughly 82% of Zurich Scudder's £30 million Threadneedle European Bond fund is devoted to govvies, 13% of which is Swedish paper.
After selling down its positions in credit over the summer, Holdsworth says the firm has begun buying credit selectively since mid-September when spreads widened, making some bargains in the single-A and triple-B markets. So far, Holdsworth has picked up Halifax Group Euro Finance, a 7.627% undated bond callable in 2011, Telestra 6.375% notes of '11, Vivendi Environment 5.875% notes of '08 and Lafarge Coppee 6.375% notes of '07. She is considering adding some lower-rated telecom names and some auto paper, but says it is too early to make a decision. Roughly 18% of the portfolio is devoted to corporate credits. The fund's duration is 5.6 years and it is benchmarked against the Micropal European Offshore League Table.