Investors Betting Strongest Junk-Bond Rally in Years Has Legs – Wall Street Journal – 01/09/17

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Investors Betting Strongest Junk-Bond Rally in Years Has Legs

Better earnings among risky companies and a slowdown of defaults have given junk-bond investors cause for optimism despite a big decline in yields

Junk bonds are luring investors following their strongest performance last year in seven years. Declines in yields, which move opposite to price, reflect economic optimism as well as moderating issuance and defaults.

“The average junk bond yield was 5.86% Thursday, a two-year low but above the sub-5% levels it reached in 2014. Despite the low yields, many investors still view junk bonds as attractive at a time when the 10-year Treasury note yield is below 2.5% and stock valuations are widely seen as inflated.”

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