Minneapolis Shop May Add Corps
Windsor Financial Group may add $110 million in corporates should spreads on five-year, single-A credits widen.
Windsor Financial Group may add $110 million in corporates should spreads on five-year, single-A credits widen. Tony Albrecht, director of fixed income, manages $1.1 billion in taxable fixed income from Minneapolis and said he would increase his portfolio's allocation to corporates by up to 10% should spreads in that part of the curve widen out by at least 20 basis points.
Because of the recent monetary tightening by the Federal Reserve, Albrecht trimmed back duration to half a year short of his bogeys, the Lehman Brothers Intermediate Indexes. He is currently watching the Fed's actions to see when he can add duration but declined to speculate when that might be.
The manager's portfolio is invested in callable agencies or step-ups, hybrid adjustable-rate mortgages, fixed-rate agency mortgages and corporate bonds. Albrecht declined to specify what percentage of each sector he is invested in, but said against his benchmarks, his portfolio is underweight corporates, overweight agencies and slightly overweight mortgage-backed securities.
"I can get better spread on callable and step-up agencies than on corporates without the credit risk," Albrecht said. He said he can receive 60 basis points on agencies' bonds with a one-time call option, compared to similar corporate bonds that only give up 35bps.
Albrecht said he remained unphased by negative news surrounding the agencies. "Despite all the headline risk, the market has not priced agency spreads any differently. Obviously, the markets don't believe that there's imminent danger there."