Why the Junk Market is in Trouble
Investors seem to have largely started to tune out the falling oil price (we can tell by how many clicks we get from readers!). However, one thing that many may have forgotten is that weaker oil prices may start to have a seriously negative effect on a key priced-for-perfection market-junk bonds. Remember that a large portion of the US junk bond market-currently sporting 5% yields-is comprised of companies who rely on shale oil. Evidently the move in oil has already spooked some investors as there was pushback from investors on new junk bond offerings with aggressive pricing in recent weeks, including for Charter Communications and Virgin Media.
FINSUM : Junk bond prices are way too rich for oil to plunge back into the $20s like it did last year. If oil keeps falling, junk is going to have a rough time.
- junk bonds
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