swaps

High Yield Bond Rally May Be Coming to an End

For those who bought COY at $3 they have a doubler and will probably want to cash out, rather than wait around four years to collect their effective 24 percent annual yield from their original purchase price.

I bought months ago and so far have an 8 percent gain, plus an almost 12 percent yield from my purchase price. My plans are to hold but sell if the price gets back to what I paid, for I will have at least collected interest at rates much higher than money market or CD's/. I am using COY as a proxy for money market, and not as a trading vehicle, but the traders are the ones who make the money and conserve capital.

You are correct to be cautious and think about profit taking for the yield in junk bond funds is offset by the falloff of bonds that go bad within the portfolio, a hit to the capital base.

Long COY