Tags: Junk | bond | bubble | yield

Some Experts Worried about Junk Bond Bubble

Sunday, 07 Oct 2012 04:11 PM

By Dan Weil

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
Junk bonds have registered an impressive rally for most of the past 3 ½ years, and the rally has intensified in recent months.

The BofA Merrill Lynch High Yield 100 Index has generated a total return of 11.2 percent so far this year. That has many market participants worried that the market has run up too far too fast.

With interest rates close to zero, investors are desperate for yield, and junk bonds represent one of the few places where they can find it. Some conservative junk bond mutual funds yield more than 6 percent.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

Investors threw a record $34 billion into junk-bond mutual funds in the first nine months of the year, The Wall Street Journal reports.

But investors are so eager that they’re taking on paper from weaker and weaker companies, and that’s a major risk.

"We're concerned about it," George Rusnak, director of fixed income at Wells Fargo, told The Journal. He said he is trimming his clients' exposure to junk bonds, a year after building it up. "We don't see as much opportunity going forward," he said.

The tide may actually be turning. Junk bond funds saw their first outflows last week in the last 17 weeks – to the tune of $410 million, according to EPFR Global.

Investors "are not ready to make the massive, the-world-is-OK trade," Colleen Denzler, global head of fixed income strategy at Janus Capital Group, told Reuters.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

China Factory Gauge Falls From Initial Reading as Growth Slows

Monday, 29 Sep 2014 22:48 PM

A Chinese manufacturing gauge fell from an initial reading a week ago as a property slump weighs on the world's second-l . . .

Fund Manager Hussman Sees 'Ingredients of a Market Crash'

Monday, 29 Sep 2014 22:37 PM

You can add mutual fund manager John Hussman,president of Hussman Investment Trust, to the list of those who think stock . . .

Insana: 'Bill Gross Is Not Crazy'

Monday, 29 Sep 2014 22:23 PM

Some news reports stated that Bill Gross was about to be fired from Pimco before he quit because of erratic behavior. < . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved