Calvert Asset Management sees value in taxable municipals as opposed to the relatively tight investment-grade corporate bond market. Greg Habeeb, portfolio manager of $4 billion in taxable fixed-income in Bethesda, Md., said taxable munis continue to offer a discount to investors. He is looking to put new cash to work in taxable munis, though he declined to name specific credits. "Spread-wise, municipals are about 10-15 basis points cheaper than corporates. The corporate market is too rich. Higher-quality stuff is very rich and the lower-quality stuff is fairly valued at best," he said. More than 90% of Habeeb's portfolio is held in investment-grade assets, with the rest below the speculative-grade threshold. He noted the biggest factors currently influencing his strategy are tight corporate spreads and low interest rates.
Calvert has also shortened its duration a little to combat rising-rate risk and is currently shorter than its benchmark, the Lehman Brothers Aggregate Bond Index, by half a year. "We're staying a little bit short and then at some point as the markets rally, we'll lengthen back," he added. Calvert's corporate allocation is neutral to its index because by being flat the portfolio can take on the least amount of risk, noted Habeeb. "We don't see much opportunity in the corporate market, everything seems tight and rich," he stated, adding the fund has scaled back on its corporate allocation to 50%, down by 10%. Habeeb said he will spread new cash across sectors he already owns. He declined to name specific transactions in which he has participated.