Tags: Pimco | high | yield | bonds

Pimco: 'Case for High-Yield Bonds Is Compelling'

By    |   Thursday, 09 October 2014 01:23 PM

High-yield bonds have rebounded from their summer swoon, and Pimco high-yield portfolio managers Andrew Jessop and Hozef Arif think now is the time for investors to dive into the market.

"Today, high-yield spreads and yields are materially wider and fundamentals remain compelling" for junk bonds, they write in a commentary on Pimco's website.

The Barclays U.S. Corporate High Yield bond index yields 6 percent, compared with 2.2 percent for the Barclays U.S. Treasury: 7-10 Year bond index. That's a whopping spread of 380 basis points.

As for fundamentals, the default rate for high-yield bond issuers stood at only 1.8 percent in August, unchanged from July and down from 2.8 percent a year ago, according to Moody's Investors Service.

"Given Pimco's view for a lower-growth global economy and subdued interest rates over the foreseeable future — an outlook we call The New Neutral — the case for high-yield bonds is a compelling one, both as a tactical and strategic allocation," Jessop explains.

"The recent market turmoil has improved the relative value of high-yield bonds and we believe provides an attractive entry point, especially given the corresponding rally in 'risk-free' rates and the continued strong fundamentals of most of the underlying credits in the asset class," he adds.

The Barclays High Yield index has returned 3.9 percent so far this year.

Others are bullish on high-yield bonds too.

"Over a horizon of one year or more, we believe it would take an interest rate increase larger than investors presently expect to create negative total returns on diversified pools of well-chosen high-yield bonds," Greg Hopper, head of the global high yield strategy at Aberdeen Asset Management, writes in Financial Advisor.

© 2019 Newsmax Finance. All rights reserved.

   
1Like our page
2Share
Finance
High-yield bonds have rebounded from their summer swoon, and Pimco high-yield portfolio managers Andrew Jessop and Hozef Arif think now is the time for investors to dive into the market.
Pimco, high, yield, bonds
277
2014-23-09
Thursday, 09 October 2014 01:23 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved