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German Manager To Load Up On Triple-Bs

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Frankfurt-based Cominvest Asset Management is looking to increase its investment-grade credit weighting by up to 5% or €3.5 billion in the coming months, according to Hans-Peter Rathjens, head of fixed income.

Hans-Peter Rathjens

Frankfurt-based Cominvest Asset Management is looking to increase its investment-grade credit weighting by up to 5% or €3.5 billion in the coming months, according to Hans-Peter Rathjens, head of fixed income. The manager is focused in particular on triple-B bonds that have suffered in the recent Ford Motor and General Motors-related sell-off. Cominvest has about €70 billion in euro-denominated fixed income, 40% of which is in investment grade credit. Most of this is benchmarked against the iBoxx euro-denominated corporate bond index. "The hedge funds have had some problems recently and triple-Bs have been punished more than higher quality bonds," pointed out Rathjens. He believes the spread widening of recent weeks has been overdone, with many names selling off for technical rather than fundamental reasons. The economic cycle is still on the upswing, noted the manager. Over the coming weeks and months he expects spreads to tighten in again as market sentiment recovers, with the greatest correction coming in the lower quality bonds.

The planned increase in allocation to credit will be made across the range of non-financial corporates, said Rathjens, as it is a bet on credit, not on any particular sector. That said, the manager is positive on and already has a substantial overweight in telecommunications names such as Telecom Italia, Deutsche Telekom and France Telecom. Away from telecommunications, most of the manager's over-and underweights are no more than 1%.

The increase in credit allocation will be funded through a shortening of duration in government bonds. Cominvest is currently about half a year short the benchmark, and is planning to shorten this further by about a year. The timing of this move will depend in part on the anticipated re-valuation of the Chinese yuan, said Rathjens, and in part on Asian central banks' appetite for U.S. Treasuries.

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