Leveraged Loan Returns Will Trail High-Yield Bonds in 2011, Barclays Says

-- Leveraged-loan returns will trail those of bonds this year after the Federal Reserve indicated it will keep interest rates near zero until mid-2013, according to analysts at Barclays Capital.

Loans lag high-yield bonds on a yield-to-worst and current yield basis, analysts led by Brad Rogoff wrote in a report today. Investors should consider swapping out of loans into comparable secured bonds, the analysts wrote.

Leveraged loans and high-yield bonds are rated below Baa3 by Moody’s Investors Service and less than BBB- by Standard & Poor’s. Loans are typically repaid first in a bankruptcy before bonds.

To contact the reporter on this story: Richard Bravo in New York at rbravo5@bloomberg.net

To contact the editor responsible for this story: Pierre Paulden at ppaulden@bloomberg.net

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