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Why I care about the Fed: High-yield manager

While Federal Reserve policy does not drive his decisions, a high-yield manager said that wider market reaction to the central bank can provide opportunities.

"I care about the Fed to the extent that if people would panic and start selling that could be a great buying opportunity," Gershon Distenfeld, director of high yield at AllianceBernstein, told CNBC's "Power Lunch" on Thursday.

Read MoreDovish Fed whipsaws financial markets

The Fed on Wednesday indicated that it planned to raise interest rates but took a cautious tone on when policy changes would start. In the immediate aftermath of its policy statement and news conference, bond yields fell and the dollar reeled.

Traders work on the floor of the New York Stock Exchange on March 18, 2015, in New York City.
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Traders work on the floor of the New York Stock Exchange on March 18, 2015, in New York City.

Caution is needed when trading market movement on the Fed, especially in a limited liquidity bond environment, Distenfeld said. He believes portfolio diversification is key.

Read MoreDon't lose patience with the Fed

Distenfeld said that markets are "afraid" of the looming interest rate hike. Investors will increasingly seek high yields without considering credit risk, he contended.

"The worst thing you can do is stretch for that extra yield," Distenfeld said.

He added that, if investors take a credit risk and don't get paid back, "at the end of the day that doesn't recover."

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