 |
| Antulio Bomfim |
OppenheimerFunds is overweighting high-coupon mortgage-backed securities on the view MBS with coupons of 6 1/2% and higher are attractively priced, said Antulio Bomfim, portfolio manager of $10 billion in investment-grade fixed income in Boston. "We think the market is pricing in more prepayment risk than is warranted," the manager explained. The fund uses a variety of benchmarks including the Citigroup Broad Investment Grade Bond Index and is roughly neutral the benchmark's MBS allocation as a whole. Bomfim declined to quantify his overweight to high-coupon MBS. Bomfim specializes in yield curve strategy and thinks rates at the intermediate to long-end of the curve are lower than fundamentals justify and therefore maintains a short duration. "We are about three quarters of the way toward what we consider to be our maximum," said the manager, who declined to further specify his short. Oppenheimer's short duration has been in place for a few months and the manager does not forecast rates or focus on a single market indicator in determining his duration. But Bomfim said the yield curve position could change if, for example "the labor market picks up, and people think 'gee the economy is not as bad as we thought' and rates edge higher or if inflation continues to surprise on the upside."
Oppenheimer is roughly neutral corporates and tends to favor the shorter end of the curve. Bomfim explained as corporate spreads are tight, the short end does not contain as much default risk and "if spreads were to widen, [we can] minimize our exposure by buying on the short end, which is less spread sensitive." He declined to be more specific about his corporate allocation as it is not his primary area of focus.
