Neuberger Boosts Subprime Bonds as Oil Slump Aids Home Owners

Neuberger Berman Group LLC said it increased its holdings of U.S. subprime mortgage bonds on speculation slumping oil prices will make it easier for people to repay their home loans.

The money manager is investing about 15 percent of its $102-million Global Bond Absolute Return Fund in the securities compared with about 5 percent last year, according to Jon Jonsson, a senior portfolio manager in London. The fund buys “fairly discounted” bonds yielding more than five percent on a loss-adjusted basis, he said.

Oil prices have slumped almost 60 percent since June as the Organization of Petroleum Exporting Countries resisted calls to cut output even as the U.S. pumped at the fastest pace in more than three decades. Bonds tied to the riskiest home loans have returned about 75 percent since 2010, topping speculative-grade corporate debt for three straight years.

“Declining oil prices are supportive for economic activity, providing a boost for employment and the housing market,” Jonsson said. “Consumers will have more money to spend which supports their ability to pay their mortgages.”

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