Conning Assert Management, a money management firm in Hartford, Conn., has been dipping in to stable, non-telco credits in recent weeks in the new issue market. Among the trades, the firm applied for $50 million and got $20 million of Alcoa 6.5% of '11 ( A1/A+). Karen Kelleher, senior portfolio manager, says the 110 basis points over treasuries price is quite wide for such a stable company, which would have traded at 60-80 over 2 or 3 years ago. She believes spreads will narrow, and cites the good fundamentals for the aluminum industry.
Kelleher says Conning also picked up under $10 million of Black & Decker Holdings 71/8% of '11 (Baa2/BBB) again because the firm sees the industry as stable. She explains that the firm is slightly more bearish than the markets on the direction of the economy.
Conning is slightly longer than the 4.7 year Lehman Aggregate Index. Kelleher believes the Federal Reserve Board will cut rates by at least another 25 basis points by year-end. She sees nothing in the corporate new issue calendar that looks attractive for the next couple of weeks. The money for both purchases came out of new cash. Of its $25 billion in taxable fixed income, Conning allocates 45%, to corporates, 25% to mortgage backed securities, 18% to asset backed, 7% to treasuries, and 5% to equities.
