CYNTHIA R. PLOUCHE
Chief investment officer
Abacus Financial Group Inc.
Assets under management: $200 million
Unemployment: 6.25% midyear; 5.95% year end
Total return for fixed income: 6% to 7%
T-bills: 1.5% midyear; 3% year end
Treasury notes: 4.5% midyear; 5.25% year end
30-year T-bonds: 4.9% midyear; 5.4% year end
Dollar to euro: 95 cents
Yen to dollar: 120
Cynthia R. Plouche has a slightly bullish bias toward domestic bonds for the first half of 2002.
"I think the Fed ... sets the tone. We had a very accommodative Fed. I think the Fed will take actions to keep rates low," she said.
"We will see a more vibrant economy in the second quarter, consistent with a recovery," which she expects in the second half of 2002.
She expects fixed income to return more in the first half of the year than in the second half, when she expects the economy to be stronger. Ms. Plouche expects interest rates on the 30-year Treasury bond to bottom out at 4.8% in May or June 2002, about 50 basis points below the rate in December 2001. (The Treasury Department has announced it won't issue any more 30-year bonds).
For the 10-year bond, Ms. Plouche expects the rate to fall to a low of 4.25% in midyear, down from 4.75% in December.
"I don't think inflation will be an issue anytime in the next 18 months," she said.
On the long end of the bond market, she is biased toward Treasuries and government agencies.
"My preference is to the agency side because you get a yield spread to Treasuries," she said.
Among other sectors, Abacus managers like corporate bonds and mortgage-backed securities in the short and intermediate range.