The junk-bond market registered the economic upturn early, provided the juiciest returns as easy money floated through world markets and has led the stock market step by step to its recent five-year highs.
So, what to make of the recent sharp decline in high-yield debt indexes from stupendously strong levels?
The Merrill Lynch U.S. High Yield benchmark has delivered a total return of almost 150% since it bottomed in late 2008, compressing the prevailing junk yield to below 6% and hoisting aloft the values of popular junk exchange-traded funds SPDR Barclays High Yield Bond (JNK) and iShares iBoxx High Yield Corporate Bond (HYG). Those ETFs have pulled back a quick 1% in price the last 10 days or so, a drop that the previously tightly linked stock indexes have so far ignored.
This should serve as one among several caution flags waving at investors as the stock market’s three-month rally matures. It would be unreasonable to suggest that after tagging along behind high yield’s relentlessRead More »from Do Junk Bonds Still Live in the Best of Both Worlds?