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Brisk Demand for Corporate Bonds: Morgan Keegan Exec

Thomas J Peterson | Getty Images

Banking on investment-grade corporate bonds may not be right for the investor who likes quick returns, but it does the trick for CD, Treasury or agency buyers, a fixed-income specialist told CNBC Thursday.

“They [investors] may say, ‘I want the safety of a strong corporation, but I need the yield, something greater than what’s going on in the Treasurys,’ ” said Kevin Giddis, who has been at Morgan Keegan since 1988 and president of its fixed-income capital markets desk since March.

He said demand for investment-grade corporates is brisk.

“Those investors say, ‘I want an A-rated credit. I don’t want to jump off into the high-yield world, but I want to get paid more.”

While year-to-date the S&P 500 has fallen, corporates have yielded investors 9.44 percent. A Citigroup banker told CNBC Tuesday that high-yield bonds are offering returns between 8.25 percent and 8.50.

Giddis’ Picks:

He favors those in the financial sector over the industrial sector, for their better spread and credit rating.

PNC

“You can get A to AA-rated credit. You only have to go out only about seven years. You can get a spread of 135 to 140 basis points over the comparable Treasury.”

Morgan Stanley

“[It's] A 5-year bond, that’s short enough on the curve. You’re only picking up 200 basis points, close to a 4 percent yield, so you’re going to get yield and you’re going to get stability and you’re going to get a strong enough credit to weather any storm.”

To learn more about bond investing, specifically high-risk bonds, watch the "Bond Bets" special segment, Friday, August 20 on Street Signs, 2pm ET.

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