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Bet on auto loans in 2016: Expert

Don't give up on betting safely and scoring decent yields for 2016, says Thornburg Investment Management's Jeff Klingelhofer.

"The consumer balance sheet is where we are finding the most interesting sources of yields," the portfolio manager told CNBC's "Power Lunch" on Monday. Klingelhofer considers auto loans and credit-card securitizations as key sectors for the coming year.

While Klingelhofer notes that there are programs that bundle a wide spectrum of loans, "generally" the auto-loans market separates subprime and higher-quality securitizations into "two different buckets," making the sector safer than many investors think.

"The higher quality securitizations, higher quality [borrowers] in the loan space tend to go into a unique and discreet bucket, versus the subprime [borrowers], which are also pushed into a discreet bucket," he said. "Again, we are focusing more on the higher-quality spectrum of the space, currently."


The auto-loans sector worries some market watchers who fear the possibility of subprime and high-quality being sold together in this sector, basically a housing market redux.

The November 2015 Consumer Credit Default Indices, which measures changes in consumer defaults rates, reflected the auto-loan default rate at 1.04 percent, up four basis points from October, according to a Dow Jones/Experian report for the S&P. The first mortgage default was up one basis point at 0.82 percent, and the bank-card-default rate had increased 16 basis points, coming in at 2.91 percent for the month of November.