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Investors Dodging Neediest Borrowers’ Bonds

Asset managers reduce holdings of lowest-rated junk bonds.

By Lisa Abramowicz | Updated on October 12, 2012

Investors from Vanguard Group Inc. to JPMorgan Chase & Co. are shunning bonds from the neediest borrowers as a slowing economy sends the default rate for companies that ratings firms deem to be in “poor standing” to the highest level since 2009.

Vanguard’s $18.4 billion fund that buys junk bonds is “incrementally taking down risk on a credit-by-credit basis,” said Dan Newhall, principal at the biggest U.S. mutual-fund firm. J.P. Morgan Asset Management has been reducing debt from companies more affected by lower consumer spending and has “dramatically” decreased holdings of securities ranked CCC since 2009, said Bill Morgan, a high-yield fund manager.

 

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