Meridian Management is using new cash and the sale of some Treasuries and agencies to capture spreads on investment-grade corporates that are at historical wides. Pat Moon, a managing principal for $100 million in taxable-fixed income, says the last 18 months have provided a unique opportunity to buy corporates that have undergone spread-widening amid concern about slower economic growth. He recently purchased several million dollars of Baa3/BBB rated Dana Corp.'s 63/4% notes of 3/1/04, whose wide spread, currently about 580 basis points over comparable Treasuries, Moon attributes to wider concern about a downturn in the auto parts industry and their exposure to liability for using asbestos in some of their brake pads. "Our feeling is their exposure is minimal," he adds.
The Little Rock, Ark.-based firm has a portfolio allocated 50% to corporates, 25% to Treasuries and 25% to agencies. Duration on its intermediate-range portfolio is about 4.25 years, while the longer-term portfolio has a duration of about 5.5 years, both of which are long their respective benchmarks, the 3.46-year Lehman Brothers Intermediate Government/Credit Index and the 3.99-year Merrill Lynch Master Bond Index.
