Bryan Keogh (Bloomberg):
For all the hysteria about a global credit crisis that created the biggest run on Treasury bills in two decades, high-yield, high-risk bonds may prove to be the best investment in the debt market.Realogy has been added to CDS IndexCo's high yield index.That, at least, is what James Swanson, chief investment strategist at MFS Investment Management, Matthew Eagan, portfolio manager at Loomis Sayles & Co., and Nuveen Investment Management's Manny Labrinos are telling their customers.
Some high-yield bond premiums rose so high that they implied a default rate of as much as 20 percent, said Swanson of MFS.
``That's sort of draconian,'' he said. ``There's a lot of strength in the corporate system that suggests we're not going to go through a heavy default rate.''
Realogy Corp., the biggest residential real estate broker in the U.S., sold $875 million of 12.375 percent, eight-year notes in April to help finance the Parsippany, New Jersey-based company's takeover by private equity firm Apollo Management LP.
The extra yield, or spread, investors demand to own the debt instead of Treasuries has doubled since then, reaching a high of 16 percentage points this month, data compiled by Bloomberg show. Bonds that trade at a spread of 10 percentage points or more are considered ``distressed,'' indicating investors expect a default.