Junk Bonds: Not So High Yield

Jun. 19, 2021 6:41 AM ETHYG, JNK, HYT, ACP, ARDC, JQC, KIO, ANGL, HIX, EAD, DHY, GGM, PHT, HYLD, CIK, DSU, PCF, AIF, NHS, MCI, USHY, IVH, FALN, HYLB, CIF, SJB, JSD, SPHY, VLT, MPV, HYLS, HYDB, HYUP, PTBD, WFHY, FHY, HYXF, FLHY, UJB, BSJS, DFHY, IBHF3 Comments
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Summary

  • US high yield bond spreads are near historical lows amid a strong macro backdrop.
  • The Fed’s future actions could put upward pressure on the US HY OAS, but we believe that to be a ways off.
  • Investor allocations to HY bond funds are subdued. Excessive optimism isn’t apparent when analyzing mutual fund positioning and ETF flows.
  • Seasonality could support a near-term uptick in spreads.

Document with title junk bond on a table. Selective focus.
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Want a sign of the times? US high yield debt recently joined the big camp of the fixed income world featuring a negative real yield. Of course, that's using the yield-to-worst and headline y/y CPI, so a little bit of

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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