Pioneer ups U.S. credit holdings, positive on economy
LONDON (Reuters) - Pioneer Investments has increased its exposure to U.S. investment-grade and high-yield credit, citing sound corporate balance sheets and earnings potential, the global investment manager said in a report on Tuesday.
The United States is probably already on its way to recovery and a mix of simulative fiscal and monetary policies will support the economy further in the second half, Pioneer said.
"Valuations are increasingly compelling, although volatility remains high. We are actively looking for a suitable entry point to increase our exposure," the investment manager said in its global markets strategy report.
Pioneer has raised its overweight position in both U.S. high-grade and junk-rated credit, citing attractive valuations, but is cautious on U.S. car manufacturers.
"U.S. corporate balance sheets are still sound, especially in the non-financial sector. Results provided by the second-quarter earnings season have so far been mostly better-than-expected," the report said.
Pioneer predicts corporate bonds will likely benefit from the U.S. government's commitment to support mortgage lenders Freddie Mac (FRE.N) and Fannie Mae (FNM.N).
A weekend report from Barron's said the government may have no choice but to effectively nationalize both companies, adding that a recapitalization could wipe out shareholders and lead to losses on subordinated debt.
The investment manager's positive skew on the U.S. economy was based on recent economic data including industrial production, which is still supported by exports, and a possible revival in weak consumer confidence thanks to the recent oil price decline.
"The real turning point for sentiment will come from a stabilization of the real estate market, which should bring a re-rating of the financial sector," the report said.
European credit spreads also remain attractive, despite a decline from five-year highs, in both the investment-grade and high-yield space, Pioneer said. But nonetheless, it made no changes to its overweight stance in European corporate bonds.
"Along the spread curve, there is an excellent risk-reward ratio on shorter (euro) maturities," Pioneer said, particularly in the short-dated 2-year maturity area.
Pioneer said it had not made changes to its holding in equities or government bonds.
(Editing by Louise Ireland)
