Skip to main content

Bank Bonds Still Have MTB Manager Bullish

It's time to bypass Treasuries, be selective in bank exposure and look at regional broker dealers.

NEW YORK (TheStreet) -- The foreclosure crisis is going to plague the banking industry for a long time to come. However, there are still some attractive bank bonds worth buying right now, says Wil Stith, portfolio manager for the MTB Intermediate-Term Bond Fund (ARIFX) .

The $134 million fund, which garners four stars from


(MORN) - Get Morningstar, Inc. Report

, is up 9% over the past year, putting it in Morningstar's 69th percentile versus its peers. Over the past five years, the fund has returned more than 6.2% annually, better than 73% of its rivals.

Welcome to

's Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks and views on the market in a five-question format.

Considering all that's going on in the economy, would you rather own Treasuries or corporate securities in your bond fund right now?


In our bond fund we are definitely overweight corporate securities versus Treasuries. We think investors are being compensated for taking credit risk and being rewarded with very attractive yield premium compared with Treasuries.

Looking at the mortgage mess, why would a fund manager want to own bank bonds here such as Citigroup (C) - Get Citigroup Inc. Report, JPMorgan Chase (JPM) - Get JPMorgan Chase & Co. Report, Wells Fargo (WFC) - Get Wells Fargo & Company Report or Bank of America (BAC) - Get Bank of America Corp Report?


We are much more selective in our bank exposure right now. We prefer a JPMorgan Chase over a Bank of America or Citigroup right now. We also favor regional broker dealers such as a


(JEF) - Get Jefferies Financial Group Inc. Report

TheStreet Recommends

or a

Cantor Fitzgerald

, where investors we feel are being rewarded with a very attractive yield.

Do you think the smaller and regional banks are more insulated from this mortgage mess?


We don't think there is going to be one small, mid- or large bank that is going to be insulated versus another. It's just their business practices or culture and whether in fact they do have putback risk facing them in the future.

How will the foreclosure crisis affect the agency bonds in your portfolio?


The financial crisis and the putback risk associated that's in the market right now is not going to have that big of an impact on the prime agency market, the

Ginnie Mae

and the

Fannie Mae

. It's definitely going to be a theme though in the private-label, private mortgage-backed arena.

Do you have any idea how this is all going to play out?


Unfortunately, we think it's going to take quite a bit of time. We think the putback risk that is in the market right now is going to make much less of an impact than what the market is pricing for. However, this is going to take several years to work its way out, and the real question is whether the market is going to afford these banks that time.


Reported by Gregg Greenberg in New York


>To submit a news tip, email:



>>CIO Offers Nuggets From the Bond Boom

>>PerkinElmer Chief Sees Good Health Ahead

>>Fifth Third is No. 1 Fans of Corporate Bonds

Follow on


and become a fan on


Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.