By Min Zeng
The ?gold rush? into junk bonds could come to a screeching halt if political tensions rise during forthcoming U.S. debt-ceiling negotiations, warns Mark Kiesel, a top fund manager at Pacific Investment Management Co.
Mr. Kiesel is worried about a re-run of the summer of 2011, when lawmakers? refusal to raise the U.S. government?s borrowing limit created a standoff that that led Standard & Poor?s to strip the U.S. of its Triple-A credit rating.
If Democrats and Republicans can?t find a compromise solution next month, he sees the risk of another credit downgrade and a revival of the previous episode?s market turmoil, when investors dumped stock and junk bonds?debt securities that are rated below investment grade?en masse.
?That is the main risk factor in the market now,? said Mr. Kiesel, Pimco?s global head of corporate bond portfolio management, in an interview Thursday. ?Investors should be more selective in the high yield market and favor higher quality credits in growth industries.?
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