Beware High Yields (Depending on Fed)
If the Fed isnât stimulating high yield bonds, then they might be highly risky and extraordinarily overpriced. High yield bonds spreads have narrowed significantly versus Treasuries in recent months, a very odd move given the worries about the economy (which usually hurt junk bonds). Some think the Fed may be buying such bonds, which would drive prices up and yields down. Spreads are down 110 basis points this year.
FINSUM: If everyone was so worried about the economyâwhich would usually push Treasury yields down and junk bond yields upâthen how could spreads have narrowed between the two? Something smells wrong here.
- high yields
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