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| Stephen Mahoney |
Glenmede Trust Co. may add up to $120 million to its holdings of Treasuries in a relative value play on the belly of the curve should yields on the 10-year reach 4.5%, according to Stephen Mahoney, portfolio manager and first v.p. The manager would lighten up his underweight in Treasuries, adding to the five-to-10 sector of the curve. Mahoney manages $2 billion in institutional fixed income from Philadelphia. The manager expects yields on the 10-year to reach 4.5% by the summer, which he thinks would be overly cheap. Yields on the 10-year were at 4.35% as of Feb. 28. Mahoney said he would finance the move by adding to Treasuries through paydowns from his mortgage holdings. Alternatively, he would sell off a single finance name should such names tighten 10 basis points for reasons other than supply. Individual names make up about 3.5% of his portfolio. He cited Morgan Stanley 4.75%s of '14 as an example of a finance name he holds.
Mahoney has also raised the credit quality of his portfolio. It is composed of 21.8% in double-A bonds versus the index's weighting of 2.5%. In addition, the manager owns no triple-Bs, while 10.2% of the index is devoted to that credit level. Mahoney's bogey is the Lehman Brothers Aggregate Bond Index. He currently is 2% overweight in agencies, 7% overweight in corporates, 2% overweight in mortgages and 10% underweight in Treasuries. His duration is 4.2 years versus 4.35 years for the index.
