Tuesday, 11 August 2020 15:59

Junk Bond Yields are Now Shockingly Low

Written by
Rate this item
(1 Vote)

(New York)

Anyone who has been looking at the bond markets is likely to be shocked at the recent moves in the space. Many “high yield” bonds (it is now necessary to use quotes) are yielding what very high quality investment grade bonds were just months ago. A recent sale saw $1 bn of new issuance for a BB+ company at a 3% yield. The huge move downward in bond yields is the result of the Fed’s unprecedented stimulus action, and in particular, their mandate to backstop corporate bonds.


FINSUM: The Fed’s actions have been so warping that they have called into question the very definition of a high yield bond. If every bond is backed by the Fed, then it makes perfect sense that their yields would equalize. In this way the market’s reaction is entirely predictable.

More in this category: « Junk Bonds are Soaring

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…