Voyager Asset Management will continue to reallocate assets to the spread sector, especially corporates, on the view that the drop in interest rates will add more fuel to the rally in the single-A and above corporate bond sectors, says portfolio manager Greg Poplett. Poplett, who heads a team running $7 billion, recently purchased a 10-year Bank of America deal, the 7.40% notes of '11 (Aa2/A), a trade he financed by selling 10-year Treasuries.
Another area Poplett has been active in recently is premium MBS, where he has been selling convexity to buy yield. An example of this is his rotation into 8% conventional (Fannie Mae and Freddie Mac) paper, where at a dollar price of above $103, and an effective duration of two years, he views it as a liquid alternative to the two-year note. He characterizes his strategy as watching for prepayment speeds to stabilize before he increases his allocation, a situation he anticipates occurring over the next one or two months. He declines to specify the potential size of the move.
The fund has an asset allocation of 30% MBS, 28% corporates, 15% agencies, 10% ABS 10% Treasuries and 7% cash. At 3.3 years, it is neutral to its internal proprietary benchmark.
