More than four years after the worst financial crisis since the Great Depression, investors are casting aside fears of credit losses as they search for returns. With the Fed holding interest rates between zero and 0.25 percent for a fifth year, junk-bond yields plummeted to a record 6.35 percent yesterday, according to Bank of America Merrill Lynch index data.
The lowest-tier of dollar-denominated speculative-grade bonds are outperforming the highest-rated notes by 3.5 percentage points this year as investors funnel cash into debt with bigger cushions from losses when U.S. Treasury yields rise.
“The market is increasingly willing to accept less of a premium for both age and size,” said Eric Gross, a Barclays credit strategist in New York.
Friday, April 12, 2013
Casting Caution Aside and Craving Junk
Here is a Bloomberg article from yesterday on growing investor demand for the "riskiest, hardest to trade junk bonds." Here are the points from the article that stood out to me: