Fuss, whose Loomis Sayles Bond Fund beat 98 percent of its peers in the past three years, said last month that the debt is as “overbought as I’ve ever seen it,” while Oaktree’s Marks told clients in a January memo that “this is a time for caution.”
Fed Debate
Several Federal Reserve policy makers said last month that the central bank should be ready to vary the pace of their $85 billion in monthly bond purchases, according to the minutes released yesterday. That showed policy makers were divided about the strategy behind Bernanke’s program of buying bonds until there is “substantial” improvement in a U.S. labor market.
The officials “emphasized that the committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved,” according to the minutes of the Federal Open Market Committee’s Jan. 29-30 meeting released yesterday in Washington.
Borrowers sold $5 billion of junk bonds last week, the lowest weekly issuance of the year, because of “volatility in the secondary market and waning investor demand, evidenced by back-to-back mutual fund outflows,” JPMorgan credit strategists led by Peter Acciavatti wrote in a Feb. 15 report.
The $16.5 billion of issuance in the two weeks ended Feb. 15 comes after $22.2 billion of the debt sales in the previous two weeks, Bloomberg data show.
“High-yield bonds will remain vulnerable to a sharp increase in Treasury yields,” the strategists said in the note.