PIMCO introduced a bond mutual fund, the PIMCO Credit Absolute Return Fund, which does not attempt to meet or exceed any bond index. The fund can invest in a wide range of fixed income securities, including high-yield and investment-grade debt, convertible securities, municipal bonds, emerging market debt, credit default swaps and other derivatives.
After tightening through much of the year, spreads over Treasurys for U.S. investment-grade and high-yield corporate bonds have reversed course, widening to about where they stood in January. For the first time in 2011, investment-grade and high-yield markets delivered negative excess returns compared with Treasurys.
Credit investors are focusing more on borrowers more likely to survive a difficult economic period, causing returns on investment-grade corporate bonds to outperform those of high-yield bonds. High-grade bonds have risen 1.36% this month, while speculative-grade debt has inched up 0.08%, according to index data from Bank of America Merrill Lynch.
Buyers of European high-yield bonds are signaling their confidence that Greece will make it through its sovereign-debt problem. This year, Europe's high-yield bonds have brought a 2.26% return, according to Bank of America Merrill Lynch. Meanwhile, U.S. high-yield corporate debt has given investors a 0.36% loss. "Greece is seen as more of a concern for the banks and investment-grade than for high yield," said Martin Fridson, CEO of Fridson Investment Advisors.
Bond investors are avoiding even the safest debt risk as they await action from the EU on Greece's debt crisis. Returns of high-yield bonds have gone negative, and sales of investment-grade bonds for the week are down 90%. The U.S. and Europe saw $3.94 billion in sales of high-quality securities this week, about 90% below average, according to data from Bloomberg.