![]() This means you should at the least be wary of investing in anything rated by Moody’s or S&P as below Baa/BBB (non-investment grade, in other words). Non-investment grade bonds – the less scary name for high-yield or junk bonds – have seen pretty high default rates in the past. The probability of a bond default is strongly reflected in the credit rating assigned to the bond by the rating agencies. Bond default risks are very realĬorporate bonds can and do default. Investing in junk bonds is a dubious idea at the best of times personally, I think most of us should skip corporate bonds and stick to Government bonds and equities, although that’s hard when Government bond yields are very low.īut certainly, investing in junk bonds when everyone else is doing so has to be a recipe for potential disaster. But plenty of those funds will be driven by private investor demand – and some private investors may also be buying junk bonds directly. Most of that buying will have come from specialist funds and institutions. Yields fell 0.95 percentage point to within 5.96 percentage points of government debt, the narrowest gap since January 2008. In early 2010, for example, junk bond sales were at a record high:Ĭompanies worldwide issued $38.3 billion of junk bonds in March, passing the previous high of $36 billion in November 2006, according to data compiled by Bloomberg. When government bond yields are too low to be attractive and investment grade corporate bonds are no longer cheap, ever-greedy investors often look to high-yield (junk) bonds as a way of getting more income for their money. How to create your own DIY corporate bond portfolio.Does opportunity knock in the UK retail bond market?. ![]()
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