Junk bond yields at record lows.
Not exact matches
With equity valuations
at historic highs and government
bonds barely eking out a return,
junk bonds offer solid
yields at a good price, he reasons.
With market volatility hitting multi-decade lows,
junk bond yields also
at record lows, the median price / revenue ratio of S&P 500 constituents
at a record high well - beyond 2000 levels, and the most strenuously overvalued, overbought, overbullish syndromes we define, I'm increasingly concerned about the potential for an abrupt «air pocket» in the prices of risky assets that could attend even a modest upward shift in risk premiums.
So while these «fallen angel»
bonds have the potential to be intrinsically higher quality than debt originally issued
at the
junk or high -
yield level, undue structural selling pressure from the downgrade can cause them to sell
at a discount.
Mr. Swaffield has described the «
yield hog» chasing strategy that we used to laugh
at when I was a
junk bond market professional.
For example, it does not include euro
bonds («reverse Yankees») that are hot in Europe, where
junk bond yields are
at a ludicrously low 2.35 % on average, and the high - grade
yield is just above zero.
There are other examples of speculation such as some European
junk bonds trading
at yields so low that no company should ever have to suffer the indignity of bankruptcy but for pure entertainment value you can't beat Jesus coin.
However, many experts feel
yields on «
junk bonds» don't justify the risk
at this time.
The structural issue
at work encouraging the deal - making is that cash flow
yields are markedly above
junk bond yields, similar to the environment during the late «80s when the market in
junk bonds flourished.
Some of the
bonds that come due in the next 12 months were trading
at prices that offered hearty investors a 25 % to 35 %
yield, one
junk bond manager told us.
Next we'll look
at junk bond ETFs, which include Horizons Active High Yield Bond ETF, iShares U.S. High Yield Bond ETF, and First Asset Active Credit
bond ETFs, which include Horizons Active High
Yield Bond ETF, iShares U.S. High Yield Bond ETF, and First Asset Active Credit
Bond ETF, iShares U.S. High
Yield Bond ETF, and First Asset Active Credit
Bond ETF, and First Asset Active Credit ETF.
I invest that middle - term money in a mix of
junk high
yield bond funds and «high»
yield savings accounts
at an online bank.
Stocks are harder to measure, so if you need better guidance, look
at the
yields on
junk bonds.
In fact, let's argue a more aggressive scenario: US
junk bond yields were near 6 % in Sep, and still trade sub-7 %, while 5 yr Treasuries are
at 0.66 %.
Corporate
bonds that are investment grade are higher, and
at the top of the risk level are high -
yield junk bonds.
It's also not the time to chase attractive
junk bond yields, since they're getting hit by interest rate risk and credit risk
at the same time.
A
junk bond or high -
yield bond is a
bond rated
at «speculative» grade or
at «less than investment grade,» likely BB or lower.
Never in my life would I have considered buying a CCC
junk bond at 110 to
yield 7 % (quick ratings guide: BBB = investment grade, BB = fine company, B = either a fine or a sketchy company the ratings agencies have no clue which, CCC = this will default just give it a few years, D = this defaulted like we said when we rated it BB uhhhh we're not good
at this).
Whether I look
at the Merrill High
Yield Master 2, BBs, or Bs,
junk bonds look expensive.
Junk bonds have tended to outperform the higher rated
bonds after a recession, and have been the preferred instrument for 2009,
yielding a 43 % return as
at the end of November 2009, according to Morningstar.
6)
Junk bonds have rallied to a high degree;
at this point I say, underweight them — the default losses are coming, and the
yields on the indexes don't reflect that.
Some of the
bonds that come due in the next 12 months were trading
at prices that offered hearty investors a 25 % to 35 %
yield, one
junk bond manager told -LSB-...]