New record low for high-yield, but spreads could still come in

At just 4.94%, the yield on the BAML U.S. high-yield index slipped below its record-low level set 13 months ago, Maybe more importantly, underlying Treasury yields are about 75 basis points higher today than they were when the record was set in May 2013, meaning spreads are way narrower today - just 3.43% vs. 4.23% last year.

The all-time low spread of 2.4% was set in June 2007, meaning there's plenty of room for junk yields to fall further as long as there's no upset in the Treasury market.

Junk bonds have now gained 5.36% YTD, not bad for a class yielding just 5.67% at the start of 2014.


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Comments (4)
  • King Rat
    , contributor
    Comments (1845) | Send Message
    In June 2007 the RFR was 4.93-5.23, give or take a basis point or two.


    240bp above that would be around 7.5% or a boatload higher than today's rates. Saying there is room to go down because the record spread was lower than today is just disingenuous.
    17 Jun 2014, 01:55 PM Reply Like
  • thirunagar
    , contributor
    Comments (31) | Send Message
    HYG's yield is 5.4 & JNK is at 5.6 according to Seeking Alpha but this news item and the Barron's article linked here says both are sub 5%. What am I missing? Can someone help me out?
    18 Jun 2014, 02:48 AM Reply Like
  • tennis44
    , contributor
    Comments (70) | Send Message
    New wells will up price to 9-10 range very soon
    20 Jun 2014, 07:43 PM Reply Like
  • lbtaockham
    , contributor
    Comments (38) | Send Message
    We track and conduct chart-based technical analysis on high yield bond funds, including corporate, emerging, global, and municipal high yield bond mutual funds.


    We don't predict price based on the many possible variables that affect supply and demand, We simply track price and develop sound low-risk investment strategies. Price trends and patterns are the most simple and direct means of measuring supply and demand no matter what the influencing factors are. In many cases, the talking heads are wrong and the market surprises many investors (for example, falling instead of rising interest rates and their affect on bond prices - despite all the hype and fear, we have been long because the charts really told us what was happening).


    This approach has worked well as a means of managing our retirement and non-retirement portfolios. It takes a little work, but the effort far outperforms guess-buy-hold-hope.


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    23 Jun 2014, 04:25 PM Reply Like
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