I still think there's scope for a significant reduction in that discount — after all,
junk bond yields just hit 5 %!
Not exact matches
Traders have pulled more than $ 1.8 billion from two
junk - focused ETFs
just in the past week: the iShares iBoxx $ High
Yield Corporate
Bond -LRB-- $ 1.06 billion, most of any ETF) and the SPDR Barclays High
Yield Bond -LRB--765.4 million, the second most), while also redeeming $ 577.4 million (the fourth most) from the iShares iBoxx Investment Grade
Bond ETF, according to FactSet and ETF.com.
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 various ways to participate in the
Junk Bond rally that is
just underway - from purchasing individual corporate
bonds to diversifying risk with double - digit
yielding Bond ETFs, Mutual Funds and individual corporate paper.
Average
yields on investment - grade corporate
bonds have risen
just 2 basis points this month to 96 basis points more than Treasuries, while
junk bond yields are up
just 7 basis points to 253 basis points over Treasuries, according to Merrill Lynch data.
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).
That said, research also shows that investment - grade
bonds as a group, which includes not
just Treasuries but government agency issues and high - quality corporates (though not high -
yield, or
junk,
bonds), can also provide solid diversification during periods of stock market turbulence.