High-yield defies the bears

|By:, SA News Editor

The quest for yield as it relates to the bidding up in junk bond prices will end in tears, says JPMorgan strategists, but not until at least next year. Defying the bears, high yield prices continue are heading higher this year, and - putting its finger in the wind - Barclays late last week lifted its full-year return forecast to 5.5-6% from 3.5%.

The team takes note of the spread to Treasurys - it's fallen to 345 basis points, already below the firm target of 350. "Although some of the incremental risk-taking could cause some challenges in the medium to long term, we do not see cause for concern in 2014 and believe high yield will continue to be well supported."

The shorts? The volume of borrowed shares on BlackRock's HYG soared to an all-time high of $3.6B at the end of last month. For State Street's JNK, short bets neared $1.3B, also a record.

ETFs: HYG, JNK, HYLD, HYS, SJNK, PHB, SJB, HYHG, ANGL, HYLS, UJB, XOVR, THHY, QLTC, SHYG, YPRO, HYND, HYZD