FYI: In the midst of this month’s stock-market tumult, it might be tempting to look at total returns on U.S. high-yield debt and conclude that all is well in the bond market’s junkyard.
After all, speculative grade U.S. corporate bonds are practically the only segment of the global debt market that remain positive for the year, according to Bloomberg Barclays data. It’s been a rough October for high yield, to be sure, but its 1.21 percent decline as measured by Barclays pales in comparison to the 9.1 percent drop in the wide-ranging S&P 1500 Index, which combines the S&P 500, MidCap 400 and SmallCap 600 indexes. Even the riskiest credits of all, those rated CCC, have managed to hang in there — so much so that Bloomberg News recently concluded that junk credit investors are barely flinching at the violent swings in stocks.
The thing is, it’s not all that unusual for high-yield bonds to hold up better amid bouts of market turmoil than their equity brethren. In fact, in data going back to 1995, each of the four times the S&P 1500 has fallen by more than 1 percent (in 2000, 2001, 2002 and 2008), junk bonds’ losses were smaller. In 2001, high-yield debt even rallied.
Regards,
Ted
https://www.bloomberg.com/opinion/articles/2018-10-25/junk-bond-complacency-doesn-t-mean-all-clear
