CORRECTED - US corporate bonds a buy while they last-Marathon

(Corrects estimate of market bottom in 13th paragraph)

By Dena Aubin

NEW YORK, Nov 13 (Reuters) - The credit crisis has created opportunities in bonds of U.S. investment-grade companies, with some sporting yields of 9.0 percent, but the bargains may not last much longer, a leading asset manager said on Thursday.

Forced selling by mutual funds and others has repriced investment grade bonds to "very desirable levels," with some bonds now trading at 60 or 65 cents on the dollar, said Bruce Richards, chief executive of Marathon Asset Management, a money manager with $11 billion under management.

Investors should focus on solid companies that are sure to survive the recession, such as AT&T (T.N), said Richards, speaking at a distressed debt conference in New York.

A recent issue by IBM (IBM.N), for example, will be "a museum piece," he said. Sold in October, the $4 billion IBM issue offered coupons ranging from 6.5 percent for five-year maturities to 8 percent for 30-year debt.

Richards is not the first to highlight the unusually high yields on corporate bonds.

Martin Fridson, chief executive of Fridson Investment Advisors, said on Wednesday that the bond market is likely repeating the experience of late 1990, when prices overstated risks of defaults. In 1991, investment-grade corporate bonds rebounded to return 18 percent, Fridson said in a research note. High-yield bonds returned 39 percent that year.

Better-quality bonds will likely rebound before high-yield bonds recover, however, Richards said. He expects prices to begin turning higher by the first quarter.

Forced selling by hedge funds, a big source of the pressure on bond prices, will largely be over by the end of the first quarter, he said.

Richards said he expects annual default rates to reach 12 to 15 percent, but the high yields on bonds are paying investors for that risk to some extent. Average yields on junk bonds topped 1,680 basis points over Treasuries in late October, the widest yield spread ever, according to Merrill Lynch data.

Banks are still at risk, with about 300 to 400 bank failures likely, but the danger of systemic failure of the banking system is past thanks to government intervention, Richards said.

"The banking system will be fixed and the government will make sure it happens," he said.

While hedge fund selling may soon play out, de-leveraging by other players will take longer, according to other panelists at the conference, sponsored by Financial Research Associates.

Ross Gatlin, chief executive of Prophet Equity, said the markets may be three to five quarters away from a "technical bottom," and bankruptcies will increase dramatically before the crisis is over.

The amount of outstanding leveraged loans, those issued to lower-rated companies, now totals $600 billion, the most ever, and historically 10 to 20 percent of those undergo some kind of default, Gatlin said.