Pimco Favors Emerging-Market Junk Bonds Over U.S. Peers as Growth Weakens
Bonds sold by non-investment-grade companies in emerging markets are more attractive than debt from junk-rated U.S. peers because the developing-nation borrowers are better prepared to withstand a global economic slowdown, according to Pacific Investment Management Co.
Emerging-market high-yield debt “looks attractive on a relative basis,” Brigitte Posch, an emerging-markets portfolio manager at Pimco, which operates the world’s largest bond fund, wrote in a note on the company’s website. Developing-nation policy makers have more room for stimulus measures while the companies have more cash reserves and lower debt levels than their U.S. counterparts, she wrote.
At 10.26 percent, the average junk bond yield in emerging markets was 232 basis points above U.S. high-yielding securities, according to data compiled by Bank of America Merrill Lynch. The gap widened from 88 basis points, or 0.88 percentage point, at the end of August.
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To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net
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