Investors should buy emerging-market (EM) debt after the worst selloff in more than a decade drove up yields, according to the world's largest bond investor.

"From a fundamental point of view, we see value in the higher yields available on many EM bonds, both in local currency and U.S. dollars," Ramin Toloui, the co-head of emerging markets at Pacific Investment Management Co. (Pimco), wrote in a note today. "In a global environment characterized by continued concerns about growth—even amid firmer economic indicators—policy interest rates in both developed and emerging countries are poised to stay low."

Developing countries' dollar-denominated bonds lost 6.1 percent in the second quarter, the biggest decline since Russia's debt default in 1998, according to JPMorgan Chase & Co.'s EMBI Global Index. Their local-currency bonds declined 7 percent in dollar terms, the second worst drop since 2003, when JPMorgan's GBI-EM Global Diversified Index started.