The last time a U.S. company rated below investment grade issued bonds was in November, marking the longest stretch in more than 20 years in which no junk bonds have been issued.
The drought reflects investors' concerns about market volatility and how much longer the economic expansion can last.
December marked the first month since 2008 in which no high-yield bonds were sold, according to Dealogic.
Weak investor demand recently increased the spread that below investment-grade rated companies have to pay over government debt to the highest level in more than two years, the Wall Street Journal reports.
While it's been a harsh month for stocks, junk bonds are outpacing the S&P 500 this half, Bloomberg First Word reports.
Overall junk bond supply has been soft, even with big issues by Netflix (NFLX -3%) and Uber (UBER). High-yield index is the smallest in more than years.
On total return basis, CCC-rated have performed the best, with CCC-rated dollar junk bonds returning 4.4% this year, almost matching the dividend-reinvestment performance of the S&P 500, according to Bloomberg.
Paying little heed to falling stock and bond markets, junk bond investors are putting more cash into retail funds.
Lipper reports an inflow of $1.39B into U.S. high-yield funds for week ended Oct. 3.
Bloomberg Barclays HIgh Yield Index return fell most in eight months, down 0.46%, but up 2.32% YTD; index shows pressure from lower stocks and commodities; VIX showed biggest gain in more than three months.
CCCs are still the best-performing asset; YTD return 5.96%.
investors pulled more than $2B from the iShares iBoxx $ High Yield Corporate Bond Exchange-Traded Fund (HYG -0.3%) last month, the most in a single month since May 2016, the Wall Street Journal reports.
Furthermore, some investors are buying protection in the form of option contracts that would help to offset losses if junk debt sells off.
The resilience of high-yield credit at a time when the Federal Reserve has been raising interest rates is leading to growing apprehension among some, the WSJ says.
The spread between Treasury yields and the average speculative-grade bond yield has declined to the narrowest level in a decade, indicating that investors are willing to take less compensation on riskier companies on the basis that economy is strong enough for these companies to make their debt payments.