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More interesting commentary on the fixed-income markets and high yield bonds. This time, from our friends over at Surly Trader:

The average annual credit loss in high yield bond portfolios was 2.65% between 1992 and 2011. During that same time period, your average yield for taking that credit risk was 10.25% and your average option adjusted spread was 5.7%. Today, that total yield has dropped to 4.96%.

At 4.96% you are picking up 4.04% above a comparable tenor in U.S. treasuries. With a 2.65% average credit loss, you are expecting a 1.39% risk premium for taking on junk credit risk if we experience historical average credit losses. Do not worry, though, because volatility has been removed from all asset classes. (emphasis added)

Source: The Race To Zero In High-Yield Credit