Monday, September 05, 2016

Boom in Junk Debt Draws Concern. As spreads on high-yield bonds narrow, investors worry .

The Wall Street Journal reports:
High-yield corporate bonds have been a hot investment in 2016. Now, some investors are fretting that the debt may have gotten too popular.

Drawn by higher yields than on safer bonds and lower valuations than on stocks, portfolio managers and individuals alike have poured money into junk bonds this year. In 2016, more than a net $6.4 billion had flowed into high-yield mutual funds through the end of August, according to data from Thomson Reuters Lipper. Over the prior three years, $47.7 billion flowed out of the funds.

The tide of money has pushed up prices and returns, attracting additional funds from investors. In 2016, the iShares iBoxx High Yield Corporate Bond fund has returned 12%, beating the 7.8% total return by the S&P 500, according to FactSet.

Bond yields fall when prices rise, so spreads—the amount by which yields on junk debt outstrip those on Treasury debt—have fallen to their lowest levels in more than a year, according to Bloomberg Barclays data.
An article , well worth your time.