High Yield Bonds Are Not Always Good
Last year’s anxieties of many investors that was caused by the high-yield bond market has already receded. Now, it left a very alluring price especially with stocks having reconvened really hard together with government bond yields on the lows. However, this must also serve investors an extra precaution.
There are junk bonds that was affected which mixed with some other risky assets in the early six weeks of this year making investors to experience a rough ride. On the other hand, the change has been really piercing. Currently this year, According to the Bank of America Merrill Lynch indexes, U.S. junk bonds are up 5.4% and their European peers are up 3%.
Despite what is shown, yields are still up top. Last year on 2014, it resulted to a low around 5% while the current U.S. index yields is just under 8% which must be a very tempting look based from today’s yield-starved world.
The upswing in yields means investors are being paid more for taking the risk of default: the market is far better positioned from that point of view than previously. But are they being paid enough?