Yields on US junk bonds, measured by the yield on the Bloomberg-Barclays US Corporate High Yield Index, have been tightening for six straight sessions to reach record lows below 4% on Monday.
Positive investor sentiment driven by ultra-low interest rates, huge stimulus programs and Covid-19 vaccine rollouts have led yield-hungry investors to lap up junk-rated bonds since the new year began with record issuance of $52bn, the highest-ever January issuance. Yields have been falling across the board within junk-rated bonds with even CCC-rated average bond yields dropping to record lows of 6.21% despite being just three notches above default. David Norris, head of U.S. credit at TwentyFour Asset Management said, “This robust new issue pipeline of lower-quality credit is worth poring over as there are likely to be some good stories in here for investors with sufficient liquidity to get involved.”
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