Segall, Bryant & Hamill will look to add some $60 million to its mortgage portfolio while selling 30-year U.S. government securities. Greg Hosbein, portfolio manager of $1.2 billion in taxable fixed-income, says the move will allow the firm to guard against a possible rise in interest rates while maintaining the same incremental yield. The firm will look to buy TBA pass-throughs with a current to slight premium coupon, preferably from newer production. Hosbein favors newly produced MBS because they offer greater yield and do not pay down as quickly. As a trigger for the trade, the firm will watch for signs of an improving employment picture leading to a second half recovery. "Weekly claims dropping below the 400,000 mark would be one example. If companies are more willing to hire, it probably means they're also increasing other areas of investment," Hosbein says.
At a duration of 4.0 years, the Chicago-based firm is slightly long its bogey, the 3.84-year Lehman Brothers aggregate index. It allocates 40% to corporates, 32% to MBS, 11% to Treasuries, 10% to agency debentures, 5% to asset-backed securities and 2% to cash.
