Ask the Manager: Skyler Weinand on How Investors Should Approach Bonds Today

Skyler Weinand, CEO of Regan Capital, joins our Ask the Manager series to discuss where investors should be looking as the Fed eyes rate cuts, the case for income in fixed income, and what sets Regan’s latest launch apart.

The Fed is poised to start cutting rates again this Fall. Where should investors position themselves on the rate curve?

Investors got burned last year anticipating that a cut in short-term interest rates would also lead to lower rates across the curve.

The front end of the curve still offers the best projected total return over the next year as those rates will come down the most with up to five potential Fed cuts priced in.

Investors can best take advantage of this node by investing in high quality floating-rate bonds.

If there are less than five cuts and/or the curve steepens out dramatically, yields on floaters will increase.

President Trump is calling for up to a 3% rate cut in the Fed Funds rate. Is this a possibility and how should investors model this out?

It seems like anything is possible these days.

In addition to massive interest rates cuts on the front end, the administration could also institute yield curve control, whereby issuing treasury bills to in turn buy long bonds and bring longer term rates down.

Investing on these precepts, however, would be pure speculation.

With the front end of the curve still inverted, investors would be best served staying in short, high quality, floating rate debt, which would allow for liquidity and the ability to pivot when the curve steepens out meaningfully, which would reward duration investors down the line.

Should fixed income investors position themselves for interest income or price growth going forward?

5%+ yields can be achieved with minimal volatility on the front end of the curve, but investors can also lock in safe investment grade yields of 6+% for 30 years as well.

Regardless of how long one wants lock in a generational opportunity of 5+% yields, we think the preference for income over price growth is here to stay.

The US housing market is slowing down. How will mortgage-backed securities fare if home prices start to drop?

The bulk of mortgage-backed securities are guaranteed by the US government or its sponsored entities.

Those that aren’t guaranteed were primarily issued between two and twenty years ago; those borrowers have accumulated a tremendous buildup of home equity.

The entry point for mortgage bonds today is unprecedented as refinance and sales activity has never been lower. 

This offers investors incredible upside to higher activity levels, even via potential defaults or forced sales.

How do you think about putting together a fixed income portfolio today, after over a five-year drawdown in major fixed income indices?

Both the front and back end of the curve offer relatively high nominal yields, whereas the belly has priced in a recession.

The shape of the curve calls for allocating to the wings of the curve.

On the front end, we like high quality floating rate mortgage bonds.

On the back end, we like US Treasury strips as well as high quality mortgage, corporate and municipal bonds.

One can pick their desired duration by adjusting the allocations to these two buckets.

The Regan Total Return Income UCITS ETF (RMBS) is Regan Capital's first European offering. What compelled you to enter the European UCITs market and what may you have in store for investors?

Investors worldwide are starved for high quality income funds.

The United States residential real estate market offers one of the highest quality, low risk, sources of income in the world.

Yet, there’s been a dearth of investors since US Banks and the US Government pulled away in 2022. 

This backdrop offers unprecedented opportunity for both income and capital growth.

Regan has successfully launched three ’40 act funds to date, totalling more than $1.7 billion in AUM in just under five years.

Regan’s 14+ year-track record and over $2.8 billion in assets provide a steady in accessing and navigating the US mortgage bond market.

In your view, what sets RMBS apart from other fixed income offerings in the market?

The Regan Total Return Income UCITS ETF (RMBS/MBSR) is not beholden to duration and/or allocation benchmarks.

This allows Regan Capital to at any time, invest in superior risk/reward opportunities relative to the market.

While the mortgage-backed security market is a $10+ trillion market, many participants simply cannot access these bonds due to internal and modelling constraints they may have.

Regan has been in this market for 14+ years, and its principals have spent more than 25 years investing in mortgage bonds.

RMBS aims to capitalize on Regan’s long tenured history of outperformance by providing access for European investors in a liquid format.

About Skyler Weinand

Skyler Weinand is the CEO of Regan Capital. Prior to forming Regan in August 2011, Mr. Weinand was head of residential and consumer asset-backed (ABS) securities trading at Cantor Fitzgerald from July 2007 to March 2011.

Prior to that, Mr. Weinand was responsible for trading a $2+ billion mortgage-backed securities (MBS) portfolio at Sit Investment Associates from July 2005 to June 2007.

From 2001 to 2005 Mr. Weinand was employed with GMAC -RFC, where he was responsible for portfolio valuation on a $1 billion MBS subordinate book, structuring collateralized debt obligations and structuring the first re-performing securitizations to come to market.

Mr. Weinand is a graduate of the Carlson School of Management at the University of Minnesota with Bachelor of Science degrees in Finance and Management Information Systems.

This article reflects the views of the interviewee and not those of Trackinsight, its parent company Kepler Cheuvreux, or any affiliates. It is provided for informational purposes only and should not be considered investment advice or an endorsement of any products or opinions. Please consult a registered financial professional before making investment decisions.