Barron's Q&A with T. Rowe's Mickel
Barron's published a Q&A with T. Rowe Price's Cheryl Mickel entitled, "Finding Good Yields in the Banking Tumult." It says, "As banking turmoil roils markets, Cheryl Mickel, who oversees money markets, short-term taxable bonds, and stable value for T. Rowe Price's fixed-income group, is finding opportunities amid the chaos -- even in the short-term debt of banks.... Mickel, who heads T. Rowe Price's U.S. Taxable Low Duration Group, oversee[s] more than $100 billion in assets. But rather than hunker down, Mickel's team is searching for opportunities to lock in higher yields." Mickel comments, "The move we are seeing in the market can wreak unforeseen havoc from hedges and positioning that may be offsides, so you have to be on high alert here. We have been conservatively positioned and are starting in a ZIP Code of higher rates, which provide a lot of cushion that we didn't have a year ago.... We are looking for dislocated pockets of opportunity. All yield is not created equal, so we are looking selectively for strong credits that can weather the volatility. We look through each company and put each in context within the broader market, searching for strong business models and cash flows. We are looking at the ability [of banks] to withstand a run, what their asset base looks like -- and how they are managing it -- and differentiating among specific companies based on how they are positioned to withstand volatility." The piece asks, "Where should investors be parking their cash right now?" She responds, "We advise our investors to divide their cash needs by time. For example, businesses and individuals usually have cash required in the very short term for unforeseen emergencies and daily needs -- think zero-to-six months. This might be in a bank, or you may consider a money-market fund with a time frame of a few months. We are seeing money-fund flows growing significantly, and this is presumably out of bank deposits, especially from smaller banks. If pressures within the banking system continue to mount and spread, we'll see continued moves in this direction. I would consider owning government money funds for liquidity and short time frames. Yields for government money funds are in the 4.7% range, gross; 4.5%, net range."
