Junk bonds make another run at sub-5%

It was May 2013 when the yield on BAML's benchmark index slipped below 5% for the first time ever, after four months earlier falling below 6% for the first time ever. What happened next was a bear market in fixed income which sent yields on all instruments sharply higher.

This year's big bull run for fixed-income has brought 5% back into play, with the yield on the BAML index sliding to 5.002% this morning. Junk bonds (HYG, JNK) have already delivered a return of 5.16% YTD, and now yield just 350 basis points more than comparable Treasurys.


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Comments (9)
  • sethmcs
    , contributor
    Comments (3565) | Send Message
    Someday this foolishness will end but not today.......
    10 Jun 2014, 11:52 AM Reply Like
  • dnorm1234
    , contributor
    Comments (1111) | Send Message
    Agreed. Of all the bearish bubble talk, this spread is one of the scariest things. It can't end well.
    10 Jun 2014, 12:04 PM Reply Like
  • I'm Howard
    , contributor
    Comments (117) | Send Message
    The Fed can not afford to raise rates, the U.S would be driven to Default,all Government Benefits that are indexed would be increased resulting in exponential debt Growth,so the presses will keep printing and the game of Musical Chairs will keep happening until the music stops.
    The time bomb is all the unfunded Government Obligations like medicare and Federal Pensions?
    No Debt, if you have No Debt you can weather any storm.
    10 Jun 2014, 01:22 PM Reply Like
  • Brian Auty
    , contributor
    Comments (4998) | Send Message
    What's normal for these numbers. Doesn't seem like much of a premium?
    10 Jun 2014, 01:39 PM Reply Like
  • David Sebastian
    , contributor
    Comments (30) | Send Message
    This is not a "High Yield" Market. It is a "Low Yield" Market. "Investors" if we can call them that, are not being compensated for their risk taking. This along with Senior Loans are the most "bubblish" markets today! When the markets correct, and they will, crappy companies with negative cash flows can default just as easy with 5% bonds as with 10%.
    10 Jun 2014, 02:13 PM Reply Like
  • The_Hammer
    , contributor
    Comments (5092) | Send Message
    No problem. All we need now is PIK financing to keep this scheme going.
    who is the sheep buying this 5% paper?
    10 Jun 2014, 04:09 PM Reply Like
  • John Grandits
    , contributor
    Comments (634) | Send Message
    perhaps even more alarming is that Spain can now borrow money more cheaply that the U.S., a 600 bps spread on a 10 yr bond two years ago is now at parity, http://read.bi/1phb62c
    10 Jun 2014, 05:23 PM Reply Like
  • Robert Duval
    , contributor
    Comments (7852) | Send Message


    First EVERYONE says -- "it can't end well". EVERYONE is shorting risk and looking for the correction.


    Do you get a selloff in anything when EVERYONE expects it?


    Second -- ECB QE. Third -- Dudley's commentary. "weakness in ANY asset price will not be tolerated" (paraphrase).
    10 Jun 2014, 05:26 PM Reply Like
  • mlauritz
    , contributor
    Comments (354) | Send Message
    Your use of the word EVERYONE is completely false.


    All the reports and data I am seeing published now indicate Extreme Bullish Market Sentiment.


    Greed is absolutely what is driving the current market - not Fear and expectations of a Correction as you suggest here.


    (Also: the Central Banks of the world are not going to be able to protect Asset Values once the Truth that the US is currently in a Recession is revealed this Fall... It must be that Summer Heat I'm sure!)
    10 Jun 2014, 09:26 PM Reply Like
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