Junk Debt Better Than Equities, AllianceBernstein’s Shah Saysby
High-yield corporate debt remains attractive even after return-chasing investors pushed corporate borrowing costs to the lowest level in a year, according to Ashish Shah of AllianceBernstein LP.
"We think that the income you can get off high-yield is still pretty attractive," Shah, head of fixed income for AllianceBernstein, said on Bloomberg TV. "Risk return-wise, we we like it better than equities."
Shah said it makes sense for investors to sell off energy sector bonds, given the recent decline in oil prices, even as he remains optimistic about the high-yield sector as a whole.
Junk bonds are the beneficiaries of easy-money polices in Europe and Japan that have dragged yields on $11.6 trillion of mostly-sovereign borrowings below zero. Investors are streaming into the market for the riskier debt that is now yielding about 2.5 percentage points less than the average over the past 20 years, according to Bank of America Merrill Lynch index data.
Some of the world’s top money managers, from Laurence D. Fink and Howard Marks to Bill Gross and Jeffrey Gundlach, have cautioned that buyers may be ignoring sluggish economic growth as they look to put their money somewhere, anywhere, amid low interest rates.
Risky bonds are nothing new to AllianceBernstein. Earlier this month, New York-based senior portfolio manager Morgan Harting cited the bonds of Brazil as among the most attractive, despite the nation’s political turmoil and after the worst recession in over a century led to a selloff last year.