Investors should be wary of high- yield borrowers as slowing growth in Asia threatens profitability, according to Pacific Investment Management Co., manager of the world’s biggest fixed-income fund.

Companies in Asia outside Japan almost tripled junk bond sales to $19.2 billion this year compared with $6.85 billion during the same period in 2012, data compiled by Bloomberg show. China’s economy will slow to average 6 percent to 7.5 percent annual expansion during the next five years from 9 percent the past five, weighing on the region’s growth, according to a report from Newport Beach, California-based Pimco.

“The slow-growth landscape favors higher-quality credits and warrants caution on higher yielding names that could become impaired in an environment where profits will be challenged,” Tokyo-based Tomoya Masanao, the head of portfolio management for Japan, wrote in the report due for release today. “The emphasis should move away from risk assets that have benefited purely from the central bank liquidity wave in which valuations have become detached from fundamentals.”

Investors redeemed more than $6 billion from high-yield bond funds in the week to June 5 and fixed-income funds posted their biggest weekly outflows on record amid speculation the Federal Reserve may slow asset purchases, which have fueled flows into emerging markets, data from EPFR Global show.

Long Treasuries

Treasuries are “the place to be,” Bill Gross, Pimco’s co- chief investment officer, said June 6, after raising holdings of U.S. government debt in his Pimco Total Return Fund to 39 percent as of April 30, the highest level since July 2010. Gross predicted the three-decade bull market in bonds probably ended at the end of April.

Yields on speculative-grade notes from companies in emerging markets in Asia fell to an all-time low of 6.38 percent last month, helping to boost issuance, before surging to 7.51 percent as of June 10, according to Bank of America Merrill Lynch indexes.

High-yield bonds, also known as non-investment grade, speculative-grade or junk, hold ratings lower than BBB- from Standard & Poor’s and Fitch Ratings Ltd., or the equivalent Baa3 from Moody’s Investors Service.

Risk Surges

The cost of insuring corporate and sovereign bonds in Asia against non-payment surged to the highest since September today, according to traders of credit-default swaps.