Gibson Smith, who helps manage the US$1.5 billion Janus Flexible Income Fund, says the corporate bond fund has returned 4.07 percent year to date, putting it in the top quartile of funds with a similar objective.
With signs of economic rebound reflected in a handful of better-than-expected corporate earning reports, investors are more likely to buy corporate bonds for their higher yields, instead of Treasuries, Smith said. Among the "relatively good" news, DaimlerChrysler AG reported a profitable second quarter, after losing money in the first three months of this year.
Citigroup Inc this week said its second-quarter profit rose 13 percent.
Such news in "big sectors" helps ensure corporate bonds will be the best bets for total return this year, he said. Still, he's selling debt of energy companies that he expects to decline as oil prices recede, and buying other "more defensive" corporate bonds, he said.
The average investment grade bond yield was 1.34 percentage points more than the 10-year Treasury, little changed this month, though smaller than the 2.21 percentage point spread at the beginning of the year, according to a Merrill Lynch & Co index.
The smaller gap suggests stronger demand.
Janus was also increasing its holdings of Treasury and government agency debt as Federal Reserve Chairman Alan Greenspan this week signaled the central bank isn't done lowering interest rates, he said.
"Greenspan surprised the market, which was expecting him to say that rate cuts were taking hold," Smith said.
"He really feels that the economy is not yet out of the woods."
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