Pimco Buys Bank Debt as Basis Goes Negative: Credit Markets
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The cost of protecting U.S. corporate bonds from default has fallen below yield premiums by the most since January as concern ebbs that the world’s largest economy will lapse back into a recession, giving Pacific Investment Management Co. more reason to snap up bank debt.
Gaps between credit-default swaps and bonds have widened to 0.25 percentage point from less than 0.02 percentage point about three months ago, according to Citigroup Inc. Pimco, manager of the world’s largest bond fund, is finding as much as 1 percentage point of extra yield even after paying to insure bank debt, said Mark Kiesel, a managing director at the Newport Beach, California-based firm.