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This recent correction hit high yield corporates mutual funds where they are now 5% below their 200 mda. Wondering if anyone is nibbling and if so which funds? I have owned: PRHYX = T Rowe Price HY Bond fund
I was listing to a Doubleline conference call the other day. As I understand it, one can calulate an implied default rate in the bond price.
1. Take the yield on the HY bond. 2. Subtract the yield on a treasury bond with the same duration. 3. Mutiply by 2 (assumes a 50% recovery on the defaulted bond.
Is the implied default rate credible, based on your believes about the economy?
This makes sense to me, but I do not have any training in finance or security analysis.
Comments
1. Take the yield on the HY bond.
2. Subtract the yield on a treasury bond with the same duration.
3. Mutiply by 2 (assumes a 50% recovery on the defaulted bond.
Is the implied default rate credible, based on your believes about the economy?
This makes sense to me, but I do not have any training in finance or security analysis.
http://speroconsulting.com/2008/12/02/price-implied-default-rates/