Pioneer says buy high-yield debt after worst losses since 2008

Investors should be buying high- yield bonds as the debt is poised to rebound from the worst losses since November 2008, according to Pioneer Investments. “It tends to snap back very quickly, so it's very easy to miss” the rebound, said Tracy Wright, a Boston-based high-yield investment manager at the firm, which oversees $244.3 billion. “We'll look back and think this was a great buying opportunity.” Pioneer joins BlackRock Inc. and Morgan Stanley in recommending speculative-grade bonds after the debt declined 6.7 percent since the end of July. Relative yields have widened to the most since October 2009 as U.S. unemployment holds above 9 percent and Europe's leaders grapple with how to prevent Greece from defaulting. The extra yield investors demand to hold speculative-grade debt, ranked below Baa3 by Moody's Investors Service and lower than BBB- by Standard & Poor's, has jumped to 8.16 percentage points more than government bonds from 4.52 percentage points on Feb. 21, Bank of America Merrill Lynch index data show. While spreads may expand further on concern that Europe's leaders will be unable to stem the debt crisis and the U.S. will enter a recession, borrowers are in a good position to weather a slowdown, Wright said. Companies were holding a record $976.1 billion of cash as of June 30, according to S&P, which puts borrowers in a better position if economic growth declines, she said. The global corporate default rate fell to 1.8 percent in August compared with 5.1 percent a year earlier, according to a Moody's report this month. “If you look longer term and if you buy today, and if you're a buy-and-hold investor, that you will look back and it will be a phenomenal buy,” Wright said. Funds that buy high-yield notes had three straight weeks of inflows in September, totaling $1.3 billion, following $4.8 billion of withdrawals in the prior five weeks, according to JPMorgan Chase & Co. research. --Bloomberg News--