Peters, who helps manage over $533 billion in assets as senior portfolio manager at Prudential Fixed Income, a unit of Prudential Investment, told Reuters that the current environment is a "perverse positive" as it takes the Federal Reserve "out of the picture in terms of pushing out rates hikes or retarding the pace of hikes."  

Against that backdrop, Peters said Prudential is buying high-yield "junk" bonds as he thinks the market is oversold. "I am very constructive on risk," he said.

The spread on the S&P U.S. High Yield Corporate Bond Index stood at 500 basis points over Treasuries, as of Tuesday's close. Riskier high-yield bond funds attracted $1.3 billion in new cash in the week ended Oct. 8, marking their biggest inflows in seven weeks after hefty outflows of $2.3 billion the prior week.

"We are keeping our duration in the portfolio for now," said Peters, who was chief global asset strategist at Morgan Stanley when he made his call about the financial crisis. "We believe that the market will continue to price out rate hikes in the front end, so the yield curve steepens."

Duration is a measure of the sensitivity of a bond's price to interest rate fluctuations. Investors opt for longer duration bonds when rates are expected to remain low or drop further, with shorter duration bonds the choice in the opposite situation.

"I do think the volatility continues - it is October - but feel like spreads are attractive in here," Peters added.

(Reporting by Jennifer Ablan; Editing by Leslie Adler)

By Jennifer Ablan