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Investing Specialists

Opportunities Abound in the Bond Market

Find out where two of Morningstar's fixed-income experts are spotting values.

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This year's stock market rout has been well-documented, but the credit crisis has also rocked the bond world, with nearly every bond-market sector, save Treasuries, incurring a mild to moderate loss in 2008. I recently sat down with Morningstar fixed-income fund experts Eric Jacobson and Larry Jones to discuss opportunities and land mines in the current environment. The January issue of my newsletter,Morningstar PracticalFinance, includes the following Q&A.

Christine Benz: I've been hearing that there are a lot of great opportunities in the corporate-bond market right now. Would you say that's the case?

Lawrence Jones: A lot of managers we respect, from Bill Gross at  PIMCO Total Return (PTTRX) to Dan Fuss at  Loomis Sayles Bond (LSBRX) and others, have been finding some great opportunities in high-quality investment-grade bonds, which have traded really to almost unprecedented levels. There has been a dramatic dislocation in the corporate market. There has been a lot of illiquidity. And as we've seen bond prices decline, some high-quality corporations' senior debt now yields 7% or 8% for fairly minimal credit risk. When you see yield levels on bonds like that, it's not surprising that a lot of managers are finding opportunities there.

Christine Benz does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.