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| Gary Wolfer |
Univest Wealth Management and Trust would like to put money to work in agencies in the seven- to 10-year range if it can find yields in the ballpark of 6%, said Gary Wolfer, senior portfolio manager. The Souderton, Pa., manager runs $700 million in fixed income. For the moment, Univest is putting money to work in five- to seven-year Treasuries as Wolfer waits for the yield curve to steepen. "We want to get back into the agency market where I can get some spread," Wolfer said. When the differential between the two and 10-year Treasury hits around 90 basis points, versus its current spread of around 70bps, the manager will pick up agency paper in the seven to 10-year part of the curve.
The only thing holding Wolfer back from adding agencies is the paltry yield at the long end. He said call risk is not a concern for him as he believes rates will continue to rise for the near term. And agency credit quality is not yet worrisome to Univest. "I'm not spooked about [Freddie Mac] and [Fannie Mae] credit quality, but it does have my attention," Wolfer commented.
Univest finds spreads on the corporate side unattractive, too, and is not adding to its current allocation until the long end widens. "We haven't deployed out of corporates yet, but we do monitor it closely and below single-A minus paper gets booted out of our portfolio," Wolfer noted. He expressed concern over Ford Motor Company and General Motors' credit quality and said the psychology of "buying on dips" which has characterized this credit cycle is worrisome.
While Wolfer does not run a benchmark fund, he looks at the Merrill Lynch One to Three Year Index and his duration is pretty short, currently at 3 1/2 to 3 3/4 years overall.
