Brian J. Brennan

Brian Brennan, Portfolio Manager:

"Real yields are rising across the board and the U.S. has caught on," said Brian Brennan, a portfolio manager who helps oversee $11 billion in fixed income at T. Rowe Price Group Inc. in Baltimore.

Agencies should keep outpacing Treasuries in the near term , based on an accommodative Fed , and a steep yield curve that continues to get steeper , said Brian Brennan , portfolio manager at T. Rowe Price Associates in Baltimore.

T. Rowe has been reaching beyond two-year notes to longer short-term agency securities to boost returns , he said.Generally , yield curve extensions and looking for yield are sort of the themes right now in all spread product..

Freddie Mac will tap the three-year sector , where there has been significant demand , on August 10 with a new $5 billion issue , in addition to selling a $1 billion 30-year bond reopening on August 14.

Quick on the heels of those deals , Fannie Mae is on deck to price two- or three-year notes and five-year notes on August 23.

"Hopefully, we'll be back in business on Monday," company vice president Brian Brennan said from the corporate offices in Linden, N.J.

Brian Brennan, portfolio manager for the $237 billion (Nasdaq:PRULX - News)T.Rowe Price U.S. Treasury Long-Term fund, agrees that speculators are playing a large role in the Treasury rally.But he doesn't see the long bond as being wildly overvalued even after being goosed by front-running hedge funds.

"The long bond is fairly valued in this range up to a yield of say 5%," says Brennan, who sees low rates, low inflation risk premiums and a transparent Fed policy behind the strength of the long bond.

A supply squeeze might be pushing prices higher, yet neither Glocke nor Brennan foresees the government cooling the market off by issuing new long-term Treasuries -- even with massive budget deficits facing the country over the next decade.

Continued rate increases by the Federal Reserve, as well as historically low yields on longer-term bonds, will probably play a bigger role in investors' portfolios, said Brian J. Brennan, a vice president and portfolio manager of the T. Rowe Price United States Treasury Long-Term fund.

"The overall dynamics and movement of the yield curve will be more powerful than the reissuance of the 30-year," he said.

Last modified: August 14.2005 12:00AM

Continued rate increases by the Federal Reserve, as well as historically low yields on longer-term bonds, will probably play a bigger role in investors' portfolios, said Brian J. Brennan, a vice president and portfolio manager of the T. Rowe Price United States Treasury Long-Term fund.

"The overall dynamics and movement of the yield curve will be more powerful than the reissuance of the 30-year," he said.

Continued rate increases by the Federal Reserve, as well as historically low yields on longer-term bonds, will probably play a bigger role in investors' portfolios, said Brian J. Brennan, a vice president and portfolio manager of the T. Rowe Price United States Treasury Long-Term fund.

"The overall dynamics and movement of the yield curve will be more powerful than the reissuance of the 30-year," he said.

Brian Brennan , portfolio manager at T. Rowe Price Associates in Baltimore , did not participate in Thursdays sales but does favor agencies to some other spread products.

``We continue to reduce mortgage-backed securities ( MBS ) in favor of bullet ( noncallable ) agencies , especially in the five-year sector , ' he said.T.Rowe predicts continued fast home mortgage prepayments , which can erode the value of debt collateralized by those loans.

Agencies are ``a good surrogate now , which have yield , and because of some of the risk inherent in mortgage-backed securities , might find some natural ( MBS ) buyers going into the market.''.