Junk Bonds are Looking Increasingly Fragile
Despite good stock market returns and rising rates, investors have apparently been just as hungry for yield. The average yield for a junk bond is currently 5.5%, well below the ten-year average of 8.3%. While prices have risen and gains have been solid this year, many long-time junk investors are cashing out, with 20% of high yield investors in May reporting that they held below average positions. The divergence between sentiment and prices apparently is caused by geopolitical discord, which is causing a flight to bonds. "No one is really comfortable with current valuations, but you have a fear of selling a bond because you may not be able to buy it back tomorrow", says a high-yield strategist at Bank of America.
FINSUM : Junk bonds are overpriced, but then again so is most everything else.
- junk bonds