The U.S. bond market sold $91.94 billion of high-yield debt in the first quarter, giving it the biggest quarterly volume in history, according to Thomson Reuters data. Investment-grade debt had its biggest first quarter, and its fifth-largest quarterly volume ever, selling $294.25 billion.
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.