It is finally happening—riskier junk bonds are seeing outflows as investors shy away from the lowest rated credits. Junk bonds have been coated in Teflon for the most part, with the riskiest bonds rallying for several months. But recently, alongside recession fears, investors have been more anxious about how such credits might fare in a downturn. Accordingly, spreads between CCC-rated bonds and BB-rated bonds have jumped to 8%, the highest level since 2016.
FINSUM: This makes a lot of sense, and is one of the more logical moves in the high yield market we have seen in some time.