Fixed Income  

Energy bonds are providing ‘mouth-watering’ prospects

High-yield energy company bonds are offering investors “mouth-watering” opportunities, according to Western Asset chief investment officer Ken Leech.

Nervous investors dumped energy bonds earlier this year as the price of oil tumbled, predicting they would sink in line with the decline.

However, Mr Leech said many of the energy companies could survive the downturn in commodity prices and had been oversold.

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The price of Brent crude oil plummeted from more than $100 per barrel to less than $50. It has since recovered slightly to around $60 per barrel.

Mr Leech said high-yield energy bonds could “withstand $50 [per barrel] oil for five or more years”.

“The valuations on some of the companies are mouth-watering, especially as they have the ability to cut production and costs, allowing them to weather the oil price collapse better than some fear,” he added.