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U.S. investor Jim Rogers pegs junk bonds as a short-sell candidate
May 12, 2014 / 7:57 PM / 4 years ago

U.S. investor Jim Rogers pegs junk bonds as a short-sell candidate

NEW YORK (Reuters) - Junk bonds, which have done well this year, look like the most promising short trade the bond market has to offer, prominent investor Jim Rogers told Reuters in an interview on Monday.

Rogers said the group’s narrow spreads made it an attractive target relative to other types of bonds. He added that he is not making the trade himself without giving further details.

Barclays’ U.S. junk bond index has risen 3.98 percent so far this year, faring somewhat better than safer investment-grade issues tracked by Barclays’ Aggregate bond index which has increased 3.02 percent.

The Bank of America Merrill Lynch junk bond index shows the difference, or spread, between junk bonds and benchmark Treasuries has shrunk dramatically this year, though not quite down to the record tight levels seen in 2013. The BAML index showed junk bonds are holding about 200 basis points spread over Treasuries, down from 298 basis points since the start of the year.

In an interview with Reuters Insider, Rogers also said he was looking to add to his Russia holdings, saying the market was “cheap, hated and massive” amid tension between the country and neighboring Ukraine.

In March, Russian President Vladimir Putin seized and annexed Ukraine’s Crimea region, prompting sanctions from Western governments. The Russian stock market subsequently took a beating, falling more than 20 percent peak-to-trough, though it has since rebounded off those lows.

The European Union on Monday announced further sanctions against Russia, which Rogers said would have little effect on the situation. He added that there was “very little chance” it could escalate into military action between the United States and Russia.

Rogers, who is the chairman of Beeland Interests and Rogers Holdings, also said that while the S&P 500 .SPX was near record levels, it didn't mean equities were overstretched. However, he echoed a common theme among investors these days by saying that high-growth names, as in the social media and biotech space, were overvalued.

“Tesla (TSLA.O) is not for me,” he said, referring to the volatile stock of the electric car maker, which is up about 23 percent so far this year.

Reporting by Ryan Vlastelica and Richard Leong

Our Standards:The Thomson Reuters Trust Principles.
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