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| Connie Bavely |
T. Rowe Price is adding up to $60 million in commercial mortgage-backed securities as it lightens up on corporate debt. "Our corporate team has decided that corporate debt is priced as well as it can be," said Connie Bavely, senior portfolio manager and head of mortgage-backed, asset-backed and commercial mortgage-backed securities. Bavely manages $8.5 billion from Baltimore, $500 million of which is composed of CMBS.
Bavely said her goal is to up T.Rowe's aggregate portfolio holdings of CMBS by a percentage point from 4-4.5%. As part of the move, the manager recently bought $30 million of the 10-year super senior tranche of a $1.5 billion deal because she prefers the increased credit enhancement of the class. She declined to name the deal.
Bavely also manages $5.5 billion of MBS holdings, with an overweight to Ginnie Maes and underweights to Fannie Maes and Freddie Macs. She attributed her preference for Ginnie Maes partly to her aversion to the headline risk of the other two mortgage companies, but also to Ginnie Mae's unique profile. "The smaller loan sizes at Ginnie Mae can be an advantage because when rates are falling, loans tend to be prepaid slower," Bavely commented. However, the manager noted she has not bought any MBS in the past few weeks because the sector has recently richened.
Bavely has also been lightening up on what she called "shaky" securities, or bonds from issuers whose balance sheets don't warrant top-tier pricing within her $2.5 billion in ABS holdings. She declined to give examples. But Bavely did say she has sold 2% of the fund's home equity loans based on those with high concentrations of interest-only loans.
Bavely's main bogey is the structured products segments of the Lehman Brothers Aggregate Bond Index.
