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In "Lay Off The High-Yield Bonds For Now," I noted that both investors and traders of high-yield corporate bonds should exercise caution based on where high-yield bonds were trading near the end of February. Since their February 29 highs, HYG and JNK have pulled back 2.77% and 2.34% respectively, the worst four trading days sell-off since November. PHB, with a portfolio more geared towards higher-rated non-investment grade debt and even some lower-rated investment grade bonds, is not surprisingly outperforming HYG and JNK, pulling back only 1.11% from its March 1st high.

After experiencing the worst four-day high-yield sell-off in a few months, what should investors do now? As I mentioned in the aforementioned article from last week, investors who scale into positions should be doing so with less vigor. For example, if you normally average into a position in thirds, you should be doing so in fifths. With that said, now is the time to purchase one of those fifths in HYG or JNK.

For investors in individual bonds, now is the time to take a look at the bonds of coal companies (NYSEARCA:KOL). In my recent article, "Buying The Dip In Coal With Select Bonds," I provide specific examples of bonds to consider, including CUSIPs and terms. The coal stocks have experienced a brutal sell-off of late, pulling many of the bonds down with them. Many coal bonds have moved lower ahead of the high-yield market in general and are worth a look at this point. Given that they are still trading off their lows of last fall, if you are interested in purchasing any bonds of coal companies, I would purchase only half now. Before purchasing the remaining half, wait to see how the financial markets react to the results of the Greek debt swap offer, which currently expires on March 8, 2012.

Speaking of the Greek debt swap offer and its potential impact on fixed income, stay away from the bonds of financial companies for the time being. This includes U.S. based institutions. If the results of the debt swap upset financial markets, I would expect spreads on financial company bonds to widen. Even if they widen just to levels from earlier this year, it will mean much better buying opportunities than at today's prices.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I am long one CUSIP from Alpha Natural Resources (NYSE:ANR), a coal company.