Dalila: Appreciate your response. You sound knowledgable about junk bonds, please write more in the future. I bought 500 shares at 40.3 a few months ago to collect the divy for long term supplemental income. Thanks again.
Speaking of the default rate this came out today (see below) First rise in almost two years. Still, based on junk's spread with Treasuries, current prices are pricing in a default rate closer to 6% and unless you believe we are headed for negative GDP and a nasty recession in the the next year or so, junk is still very attractively priced
>>>>>Nov 3, 2011 12:17 PM Default Rate Still Low, Just a Bit Higher Now – S&P Posted by Michael Aneiro
The default rate – that nemesis of bond investors – crept slightly higher in October, to 2.13% from 1.94% in September, according to rating agency Standard & Poor’s. The gauge measures the percentage of speculative-grade corporate bond issuers that default on their bond payments through missed interest payments, bankruptcy filings or other, more creative default methods. From S&P:
This is the first significant increase since the default rate started declining in December 2009. However, the default rate is a lagging indicator and an increasing trend usually results from sustained deterioration in both market fundamentals and economic growth.
The default rate started rising from its trough of 1.0% at the end of 2007 and reached its peak of 11.5% in November 2009. The rate had been steadily declining until September. The increase in October is the first increase of more than 10 basis points since December 2009.
S&P also noted that its distress ratio, which uses bond risk premiums as an indicator of potential future default risk, rose to 19.3 from 14.9 in September.<<<<<<<