Pacific Investment Management Co. (PCARX) has been snapping up some of the higher-rated junk bonds dumped by speculative-grade debt managers amid the recent exodus from funds.
In their rush to meet redemptions, high-yield money managers picked the wrong assets to sell and created pricing that’s “quite attractive” for some instruments rated just below investment grade,Mark Kiesel, Pimco’s global head of corporate bond portfolio management, said at a media briefing in Sydney today.
“High-yield managers have been selling, in our opinion, what they shouldn’t be selling,” said Kiesel, who’s also a deputy chief investment officer at the Newport Beach, California-based company. “They’ve been selling the safest part of the high-yield market, the BBs. We’ve been cherry picking many of these assets over the last couple of weeks and buying them because they’re trading at significant discounts to where we think fundamental value is.”
Record withdrawals from junk-bond funds helped push average U.S. speculative-grade yields to 6.3 percent on Aug. 1, the highest in almost six months, according to a Bank of America Merrill Lynch index. The market has since rebounded, with yields easing back to 5.97 percent yesterday. Monthly losses in July were the worst in more than a year.
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