State Street global Advisors, which runs €19 billion in global fixed-income assets from its London office, is going to increase its position in automotive credits by adding the expected new issue from Daimler-Chrysler when it hits the market in the New Year. Nicole Jackman, head of European corporate bond management, says the firm will increase its now slightly underweight position in autos to a neutral one relative to its benchmarks. She adds that she likes shorter-dated auto paper because it has an attractive breakeven on the shorter end of the curve and is thus less risky. She says she is waiting for the new issuance rather than buying in the secondary market because she believes she will receive a new issue premium. Following the same thinking, Jackman has already bought Ford's 5.625% notes of '04 and General Motors' 5.75% notes of '06 when they were issued recently.
Jackman says the firm is overweight telecoms. It holds AT&T's 7 1/2% of '06 and British Telecommunications' 6.875% of '11, because of the attention these companies are paying to balance sheet management. Jackman expects these names to tighten by 20 to 30 basis points over the next 12 months, at which point, she will sell.
The firm uses a variety of benchmarks, including the Salomon Smith Barney Euro Broad Investment Grade index, the Lehman Brothers Euro Aggregate, the Lehman Global Aggregate, the Merrill Lynch Sterling Corporate and the Merrill Non-Gilt.
