News Digest:

The latest round of key interest rate hikes by the Federal Reserve is making high-yield bond funds more attractive. Additionally, stronger fundamentals, lower debt issuance and reduced default rates are also serving up tailwinds for this asset class.

A report says yields for the so-called ‘junk bonds’ as measured by the ICE BofA US High Yield Index stood at 8.72% on March 21, as compared to 5.95% a year ago. It said high-yield bond spreads over Treasuries have gone up by 1.22 percentage points over the past two weeks.

Takeaway:

Of course, Treasury bonds yields themselves have actually gone down over the period amidst an overall flight to better quality while high-yield bonds seem to be headed in a diametrically opposite direction. The signals are clear – investor perceptions of actual credit risk, not just an interest rate risk, have grown in recent times.

End Notes

Source: https://www.axios.com/2023/03/21/high-yield-bond-spreads-show-increasing-recession-jitters