NEW YORK, Oct 4 (Reuters) - U.S. fixed-income markets are nowhere near ripe for bargain-hunting, even after two days of losses that have knocked bond prices to multiyear lows, a leading value investor said on Thursday.
Billionaire distressed-securities investor Howard Marks, a cofounder of Oaktree Capital Management, told Reuters TV in an interview that current market cycles still had juice in them and looked likely to keep providing gains as long as the U.S. economy kept expanding.
A champion of using economic trends and shifts in investor sentiment to time buy and sell decisions, Marks scored strong profits a decade ago by buying heavily and profitably in global markets in the wake of the 2008 financial crisis.
“I am not ringing the bell on this market. I am not telling people to get out,” Marks said. “I'm just saying, that given where we are in the cycle, that it’s probably better to be playing defense rather than offense.”
Prices in global markets for fixed income and equities tumbled on Thursday, as investors focused on inflation fears and increasing prospects for America's central bank boosting interest rates.
A surge in U.S. Treasury yields drove rises in government bond yields around the globe, while investors braced for a likely robust U.S. jobs report on Friday that may lead Federal Reserve policymakers to quicken interest-rate increases.
Marks said the selloff was not unexpected but was not yet severe enough to justify bargain-hunting in junk bonds, private debt and other risky asset classes his firm specializes in.
“Credit quality has been going down at the same time that prices have been going up, yield spreads compressing," he said. "That combination is an unattractive combination, and that is why we have been calling for caution.”
Author of a new book, "Mastering The Market Cycle," Marks said investors in the United States remained too aggressive and optimistic to justify bargain-hunting.
"Because the U.S. economy is the envy of the world, there are rather few bargains in the U.S. No one is shying away; everyone is eager to put money to work. That condition usually produces high prices and skimpy risk compensation. We would look more outside the United States," Marks said. (Reporting by Conway G. Gittens and Michael Connor in New York Editing by Phil Berlowitz)