Search results for

With defensive sectors set to be the drivers of volume in a bearish market, loans for the supermarket and top end retail sectors have recently become more attractive. Traditionally conservative margins have undergone a transformation and deals are no longer priced solely on the basis of the lucrative ancillary business on offer from this cash rich sector. Stephen Fitzmaurice reports.

Bailard, Biehl & Kaiser plans to reduce the portfolio's duration by selling some $10-$15 million of 10- and 30-year govvies in order to add five-year Treasury notes. At the same time, the Foster City, Calif., firm will seek to add corporate exposure by up to $10 million. Portfolio managerEric Leve says he is making the move because he expects 30-year corporates to outperform 30-year Treasuries due to additional government defense spending, industry bailouts and rebuilding, and decreased Treasury buybacks. Leve manages just over $100 million in taxable bonds, though the firm manages $250 million, and he says advisers of private accounts at the firm often mimic his trades.

A lowered risk tolerance and anxiety about market resilience made for sluggish activity last week. Some have taken a "slow and steady" attitude as the economy pulls itself back up from the recent World Trade Center attacks. But, as a banker put it, "We may be in the first act of a four-part play." Meanwhile, some dealers took the reprieve in stride, saying it was a result of the Jewish holiday and many being out. One market player had advice for those working last Thursday: "It's a good day to clean out your sock drawer."

Financial Counselors swapped 3% of its portfolio, or $36 million, from Treasuries into high-grade corporates last week, says Peter Greig, portfolio manager for the Kansas City-based investment firm. Concerned that the Federal Reserve is nearing the end of its easing cycle, Greig says the move was designed to preserve the portfolio's principal while picking up some incremental yield. He adds that if corporate spreads widen by an additional 15 basis points, he will swap an additional 3-6% of the portfolio, or between $36 and $72 million.

Swiss Re Investors, the New York investment arm of the giant Swiss insurer, has purchased about $1.5 billion in 15-year mortgage-backed securities over the past two weeks. Fixed-income chief Andre Moutenot, who helps manage the $13.5 billion total-return portfolio, says the trade was made as a result of the continuing pressure on the U.S. economy, particularly as reflected in declining U.S. corporate earnings. He says with defaults and downgrades continuing to increase at historically unprecedented levels, corporate bonds will remain problematic. Similarly, the sharp rate rally will allow the massive 6.5% and 7% coupon sectors (nearly 60% of the entire MBS universe) to become refinanceable. He says that the 15-year sector, or "dwarves" as they are known, have a less volatile rate of prepayments because of the higher amounts of equity built into the loan assumption.

Debt issuance picked up significantly on the week, with just under $20 billion in debt hitting the market. Issuance patterns persisted from the previous week with AAA and AA credits tapping the market at the short end to take advantage of historically low absolute all-in rates, while BBBs extended out the curve to take advantage of historically cheap term financing. Average credit quality, weighted by dollar amount of debt issued, was at a still-high AA- level for the year. There are clear signs that the new issue market is starting to free up, although it is still very much a buyers' market. Kerr-McGee and Tyson, both low/mid BBB credits, had to come at a decent concession to the secondary market to get deals done. That said, both credits tightened on the break.

Energie Baden-Württemberg (EnBW) flagged up its intention to float next year with the launch of an innovative Eu490m going-public bond. But despite EnBW's defensive status, the success of its IPO is far from being a foregone conclusion.