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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)