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San Diego Firm Swaps Into Hi-Grade Corps

18 Mar 2001

Chandler Asset Management is trimming its A-rated corporate bond portfolio to focus on agency paper, Treasuries and higher-quality investment grade corporates, according to Kay Chandler, chief investment officer for the firm's $1.2 billion fixed-income portfolio. The San Diego-based firm recently sold the 7.125% DaimlerChrysler (A3/A-) notes of '02, which, combined with money from interest and maturities, she used to rotate into higher-rated financial and industrial credits.

Recent purchases include the 5 3/8% General Electric notes of '03 (Aaa/AAA) at 62 basis points spread over comparable Treasuries, and the 5 3/4% J.P. Morgan notes of '04 (Aa3/AA-) at 83 basis point spread over the 5-year Treasury. She also rotated into the 7.15% Merrill Lynch notes of '04 (Aa3/AA-) at 92 basis points over the 5-year curve, and the 6 1/4% Southwestern Bell notes of '02 (Aa2/AA-) at a 75 basis point spread over Treasuries. Chandler says the firm established these positions by purchasing them in $5 million bond lots.

The portfolio's allocation is 45% in agencies, 30% in corporate investment grade and 25% in Treasuries. The firm uses the Merrill Lynch U.S. Treasury and agency one-to five year index. The portfolio duration is roughly neutral to the bogey's duration of 2.2 years.

18 Mar 2001