GMAC's Bailout Helps Junk Market Too - Barron's

Troubled GMAC, owned by General Motors (GM) and Cerberus, has been good for at least one thing, says Barron's - lifting the junk bond market.

GMAC's junk-rated bonds rallied last month when the government agreed to pump $6B into the company. But that rally also lifted the broader junk bond market.

Triple C bonds, the riskiest in fixed-income, rose 5.5% in December, while the broad speculative-grade market jumped 4.5% in its first sustained rally since Q1 2008. Liquidity is improving and people are slowly starting to take risks again, prompted in part by extremely low yields on Treasurys.

Refinancing remains a risk and Wall Street expects the default rate to rise to 10% by the end of the year from 3% now, but Christopher Towle, partner and portfolio manager at Lord Abbett, says "the market is so oversold... that it's already discounted" by investors.

Towle favors electricity-generation companies, yielding around 12.4% now (down from 16% over a month ago). He also likes health care firms, including Community Health Systems (CYH), and select telecommunications bonds (like those of Cincinnati Bell (CBB) and Qwest (Q)).

Comments

[John D:]

When a country invests in it's OWN industries - it does help the industry & North American economy grow and prosper - when a country invests elsewhere then you have your rich and you have way more poor. Perhaps this is a good lesson learned by all including the government.

Jan 04 08:44 AM

[a. palmer jr.:]

I wonder if I should sell my GMAC bonds. They're up to 40% of what I paid for them.

Jan 04 11:38 PM

[ct salmon jr:]

I am considering selling mine. It is paying 8% but it is down 45% from when I bought it. At the current price I would need to keep it 3 more years just to breakeven.


On Jan 04 11:38 PM a. palmer jr. wrote:

> I wonder if I should sell my GMAC bonds. They're up to 40% of what
> I paid for them.

Jan 05 08:02 AM

[thatguy57z:]

check this one out www.youtube.com/watch?...

Jan 06 06:45 AM