Henderson Global Investors has shifted out of U.S. government bonds and is looking to add new issuance in the single-A and triple-B range. "We're beginning to think about more single-A and triple-B names, but there is still a lot of pain out there," said Peter Moore, portfolio manager. He says the firm added the recent Rentokil (BBB) and Marks & Spencer (A3) issues to take advantage of companies being forced to fund despite wide spreads. Rentokil priced last Wednesday at 145 basis points over gilds. The firm sold off its U.S. govvie positions in its £37 billion global bond portfolio, because spreads on triple-A credits were too tight and it is looking elsewhere for value. Henderson's global portfolio has roughly 25% in non-U.K. assets, 33% in European assets and 42% in U.K. assets.
Recently, Henderson added the British Telecommunications 6 1/8% notes of '06 and the France Telecom 6 5/8% notes of '10, which he says offer good value, because they were forced to fund at less than attractive levels. The bonds were trading at 149 basis points and 182 basis points over bunds, respectively, last week. "The big companies have depth to their businesses and regulators will prevent them from going under," he said. On the high-yield side, Moore said Colt, a smaller telco, which recently announced a debt buyback, also shows good value and its bonds have begun to perform. The 7 5/8% notes of '09 trading at 69 cents on the dollar last week.
Henderson has also added a basket of European government debt as well as some of the better quality European banks. The portfolio is benchmarked on a client-by-client basis.
