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Junk Debt Drops Below 5% Yield For First Time On Record

Tyler Durden's picture


While most comprehend that when buying credit-risky instruments the most critical aspect of return is the spread (or additional compensation over the risk-free rate) which itself is in 'bubble' territory; it is nevertheless spell-binding that the so-called 'High Yield' corporate bond market is now trading with a yield below 5% for the first time on record - a level at which 10 Year Treasuries were trading in July 2007...

Barclays high yield index 'yield' is now below 5% - the same as US Treasuries in July 2007!


and the bubble in credit risk re-emerges with the Fed as provider of excess liquidity as opposed to CDO creation last time...


Charts: Bloomberg


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Wed, 05/08/2013 - 15:26 | 3542235 docj
docj's picture

Headline from IBD that just flashed across one of my feeds...

Stocks Turn UP in the Afternoon...

To which all I could say was, "Why, of course they did." Because, free markets, or something.

Wed, 05/08/2013 - 15:28 | 3542242 hedgeless_horseman
hedgeless_horseman's picture



At this price Milken could buy the whole fucking world.  You know he has thought the same.

Wed, 05/08/2013 - 15:30 | 3542251 Spider
Spider's picture

One day someone is going to look back at this and say, "What the hell were they thinking?"

The system is getting VERY unstable - i'm glad I keep my gold out of it...

Wed, 05/08/2013 - 15:41 | 3542291 mayhem_korner
mayhem_korner's picture



I'd keep my gold out of it too...if I could ever find it again.  That last boating trip was a real downer.

Wed, 05/08/2013 - 16:09 | 3542384 JPM Hater001
JPM Hater001's picture

I'm actually thinking that today.

Wed, 05/08/2013 - 15:30 | 3542253 Hippocratic Oaf
Hippocratic Oaf's picture

Thank you Bernanke for forcing my hi-grade clients to chase hi-yield junk and for keeping FINRA and the SEC up my ass constantly for doing so.

Keeping old ladys poor, you sick fuck!

You are truly a slimy piece of shit fuckin fuck-fuck!

Wed, 05/08/2013 - 17:47 | 3542696 machineh
machineh's picture

Bernank's retirement plan is the same as Al Gore's: make an easy $200 million on the lecture circuit at $175,000 a pop.

He won't have a clue what to do with the cash, though.

Wed, 05/08/2013 - 15:27 | 3542241 Dingleberry
Dingleberry's picture

Chase that yield, bitchez. Chase that yield.....

Wed, 05/08/2013 - 15:28 | 3542246 ShankyS
ShankyS's picture

I guess it is only revision to the mean - you know - when everything is junk. 

Wed, 05/08/2013 - 16:22 | 3542451 booboo
booboo's picture

Junk Debt ranks right up there with "Military Intelligence" as a classic oxymoronic phrase.

Wed, 05/08/2013 - 17:31 | 3542631 Mototard at Large
Mototard at Large's picture

...sort of like "science of ecnomics" ?

Thu, 05/09/2013 - 11:20 | 3544689 Colonel Klink
Colonel Klink's picture

You mean like the "nobel" prize in economic science which is sponsored and awarded by the world's oldest central bank?

Wed, 05/08/2013 - 15:29 | 3542252 1eyedman
1eyedman's picture

they gonna hold this btch up for another 30 mins?


Wed, 05/08/2013 - 15:31 | 3542260 mayhem_korner
mayhem_korner's picture



No mis-pricing of risk to see here.  Move along.

Wed, 05/08/2013 - 15:43 | 3542300 NotApplicable
NotApplicable's picture

Risk? Why as long as there's still capital left to consume, risk is off the table.

Wed, 05/08/2013 - 15:32 | 3542262 Juggernaut Nihilism
Juggernaut Nihilism's picture

The long-term average for the 10-Year is 6.61%.  This is getting unreal.

Wed, 05/08/2013 - 16:14 | 3542404 Rainman
Rainman's picture

welcome to the wonderful world of the 10y JGB

Wed, 05/08/2013 - 15:32 | 3542263 fonzannoon
fonzannoon's picture

this is why you just HAVE to own dividend paying stocks. because clearly they are not in a bubble.

Wed, 05/08/2013 - 15:36 | 3542274 TBLightning
TBLightning's picture

How is this explained to Joe Kernan?

Wed, 05/08/2013 - 15:57 | 3542341 roadhazard
roadhazard's picture

He doesn't want to hear it. Do you notice when someone is on talking doom and gloom he pretends to ignore them and has someone else asking the questions. I have an email in a file waiting to send him when the SHTF. 

Wed, 05/08/2013 - 15:38 | 3542276 Dr. Engali
Dr. Engali's picture

This is simply amazing to me. Did you think you would ever see this day? To top it off everybody is putting out bullish pieces for high yield. The muppets are toast when this one blows.

Wed, 05/08/2013 - 15:40 | 3542281 mayhem_korner
mayhem_korner's picture



You're going to see even more amazing things ahead.  No doubt about it.

Wed, 05/08/2013 - 15:43 | 3542294 Dr. Engali
Dr. Engali's picture

I have no doubt about that. I think the thing that amazes me most is that with all these distortions  it hasn't blown already.

Wed, 05/08/2013 - 15:44 | 3542303 NotApplicable
NotApplicable's picture

The world's biggest game of chicken, EVAR!

Wed, 05/08/2013 - 15:57 | 3542339 Hippocratic Oaf
Hippocratic Oaf's picture

Doc, I've been screaming this shit for two years.


These corp prices can crash 10 pts at the drop of a sombrero.

All fixed income is looking over the edge of the precipice.....look out below mother fuckers

Wed, 05/08/2013 - 15:51 | 3542321 HelluvaEngineer
HelluvaEngineer's picture

No way.  They'll all get out at the exact top and pile into GLD.  Oh, wait...

Wed, 05/08/2013 - 15:36 | 3542273 Dr Benway
Dr Benway's picture

The most critical aspect of your return is not spread but the putative preservation of capital

Wed, 05/08/2013 - 15:37 | 3542279 Bam_Man
Bam_Man's picture

All this excess funny money has to die somewhere....

Wed, 05/08/2013 - 15:37 | 3542280 FubarNation
FubarNation's picture

My god junk below 5%.  is it me or is this whole thing fucked?

Wed, 05/08/2013 - 15:55 | 3542332 NotApplicable
NotApplicable's picture

Well, could be both?

Wed, 05/08/2013 - 16:28 | 3542474 FubarNation
FubarNation's picture

True dat.

Wed, 05/08/2013 - 15:39 | 3542282 TLT
TLT's picture

Explained by the book: "Road to inflation". Author: Uncle Ben.

Wed, 05/08/2013 - 17:52 | 3542715 machineh
machineh's picture

He was gonna write Rice Paddy Road about his 10-minute rice, echoing the pellagra-blasted white trash characters of Tobacco Road.

But his editor told him that Road to Inflation would reach a much wider audience ... just as his POMOs do.

Wed, 05/08/2013 - 15:40 | 3542284 SeeNoEvil
SeeNoEvil's picture

Its a miracle of modern economics of course no risk here

Wed, 05/08/2013 - 15:40 | 3542285 Caveman93
Caveman93's picture

High Yield' corporate bond market is now trading with a yield below 5% for the first time on record .


Bwhahhahahahaha! It's Alllllllll Junk baby!

Wed, 05/08/2013 - 15:40 | 3542286 ShrNfr
ShrNfr's picture

The sad part is that junk bonds have a higher chance of paying out par at maturity than 30 year treasuries do.

Wed, 05/08/2013 - 15:46 | 3542307 NotApplicable
NotApplicable's picture

Not after someone brandishes a nuke or two.

Wed, 05/08/2013 - 15:41 | 3542292 Clowns on Acid
Clowns on Acid's picture

Junk below 5% means that there is no risk... just tail risk and Bernak says to forget that.

If Junk is below 5% then one has to buy equiites right? Bernank says so and will use the full faith and credit of the US people to enforce this schema....

Nothing wrong with that right..?

Wed, 05/08/2013 - 15:43 | 3542298 Shell Game
Shell Game's picture

This bodes well for the elderly...

Wed, 05/08/2013 - 15:52 | 3542310 W T F II
W T F II's picture

This should be a boon for prudent capital formation and help facilitate a smooth-glide path for further recovery and economic growth...!!

***ATTENTION***---My new name is now, "ANY SHILL, USA" Henceforth, please refere to me ONLY by that moniker... Thank you---***ATTENTION***

Wed, 05/08/2013 - 16:01 | 3542353 SmallerGovNow2
SmallerGovNow2's picture


Wed, 05/08/2013 - 16:08 | 3542382 W T F II
W T F II's picture

"What The Fuck"...the "II" is to signify a condition whereby I am twice as shocked. But, as of today, I am resigned to be "ANY SHILL, USA", whereby I will tow the Party line and happily assert agreement to the wisdom of policies and their beneficent outcomes...

Wed, 05/08/2013 - 15:50 | 3542319 Dr. Engali
Dr. Engali's picture

What happens when the fed drives the cost of money to zero on every product? It certainly seems like it's headed that way. Zero cost of money ( for those who have access. For the rest of us it's 6 to 29% credit cards) and zero return on your investment.

Wed, 05/08/2013 - 15:57 | 3542336 Thisson
Thisson's picture

We don't know.  That's why we're watching Shinzo Abe so closely.

Wed, 05/08/2013 - 15:57 | 3542338 mayhem_korner
mayhem_korner's picture



When something is free and unlimited in its ability to be produced, it is...wait for it...worthless.  And that, mon ami, is the answer.

Wed, 05/08/2013 - 15:58 | 3542340 NotApplicable
NotApplicable's picture

That's when we start calling each other "comrade," as private finance will be fully politicized, as they will own everything.

Of course, that's the beauty of issuing liabilities that you aren't liable for.

Good work, if ya can get it.

Wed, 05/08/2013 - 19:24 | 3542950 unununium
unununium's picture

They started calling each other "comrade" on Calculated Risk 3 or 4 years ago, before that place turned to the dark side. 

Wed, 05/08/2013 - 16:10 | 3542394 W T F II
W T F II's picture

Hey Doc,

Please try to appreciate your side of the "Carry Trade"...!! Buck Up and SMILE...!!

Wed, 05/08/2013 - 16:13 | 3542400 Dr. Engali
Dr. Engali's picture

We are all Japanese now.

Wed, 05/08/2013 - 17:18 | 3542596 W T F II
W T F II's picture

Geisha Slaves To Monetray Policy

"You WILL enjoy your time here and make our guests feel welcome..."

Wed, 05/08/2013 - 15:53 | 3542329 babylon15
babylon15's picture

Anyone can handle the exit.  Bernanke said so.

Wed, 05/08/2013 - 15:58 | 3542342 mayhem_korner
mayhem_korner's picture



If someone called him on it, Ben would exit last night's dinner into his froot of the looms.

Wed, 05/08/2013 - 16:00 | 3542350 SpanishGoop
SpanishGoop's picture

But only few will survive He mumbled after that.


Wed, 05/08/2013 - 15:59 | 3542346 css1971
css1971's picture

Negative yield on US Treasuries. Coming to a world near you soon.

Wed, 05/08/2013 - 16:01 | 3542351 sitenine
sitenine's picture

So, tell me - what good is yield when your currency depreciates? What exactly are all these 'investors' planning to do with all that cash? Just roll it over and have moar cash? At some point, don't we all need food, shelter, and basic comforts? I don't see the Fed printing much of any of that...unless we plan on eating and living in that paper...I guess you can still wipe your ass with it though, so it's not a total loss?

Wed, 05/08/2013 - 16:07 | 3542376 monopoly
monopoly's picture

At some point bond risk will be a 10 bagger. But who the hell knows when.

And, I did not realize so many here at Zero Hedge had such poor boats. So many have sunk and been lost with all their contents. Gladly, the owners of the boats all made it back to shore OK.

Gald I have no investments in boating stocks. :))) 

Wed, 05/08/2013 - 17:54 | 3542724 machineh
machineh's picture

If you did, Obama soon would confiscate it with a new yacht tax.

Wed, 05/08/2013 - 19:24 | 3542949 Clever Name
Clever Name's picture

You musta missed the memo, sunken boats are good for the economy, and clearly bullish for boating stocks.

Wed, 05/08/2013 - 16:07 | 3542377 Seasmoke
Seasmoke's picture

isnt everything just junk anyway ....

Wed, 05/08/2013 - 16:08 | 3542380 monopoly
monopoly's picture

So true, good point seasmoke.

Wed, 05/08/2013 - 16:13 | 3542401 pragmatic hobo
pragmatic hobo's picture

... bubble for sure ...

Wed, 05/08/2013 - 16:16 | 3542423 Peter Pan
Peter Pan's picture

Buying junk in order to earn some kind of decent return reminds me of people who rummage through garbage for scraps to eat.

Then again these junk bonds may end up having more end value than government bonds should the FED blow up.

Wed, 05/08/2013 - 16:20 | 3542441 Tombstone
Tombstone's picture

Junkers headed to half bank now wants me to pay them interest for holding my declining-in-value bucks.

Wed, 05/08/2013 - 16:40 | 3542497 koaj
koaj's picture

i would rather own debt of a stuggling company than the debt of a broke ass country

that being said, the shiny silver i lost a few weeks back still buys what it did 10 years ago

Wed, 05/08/2013 - 16:52 | 3542525 Herdee
Herdee's picture

Just the littlest prick on the bubble and a lot of pension funds are in trouble.

Wed, 05/08/2013 - 17:11 | 3542570 Seasmoke
Seasmoke's picture

Then throw Geithner on the bubble

Wed, 05/08/2013 - 17:02 | 3542553 random shots
random shots's picture

Tyler, how about an overlay of the spread for us non-Bloomberg Terminal losers? 

Wed, 05/08/2013 - 17:38 | 3542654 Aurora Ex Machina
Aurora Ex Machina's picture

Washington (AP) -- In an unprecedented action, an Air Force commander has stripped 17 of his officers of their authority to control and launch nuclear missiles.

The 17 are being sent to undergo 60 to 90 days of intensive refresher training on how to do their jobs. The action comes after their unit performed poorly on an inspection and one officer was investigated for potential compromise of nuclear launch codes, according to Lt. Col. John Dorrian, an Air Force spokesman. [6hrs ago 8th May]


~AP via the Pentagon. Someone is letting everyone know they're just as sharp as they were in the 60's.


This comes in line with the report 21st April:

Under the plan, nearly 200 B61 gravity bombs stockpiled in Belgium, the Netherlands, Germany, Italy and Turkey would be given new tail fins that would turn them into guided weapons that could be delivered by stealth F35 fighter-bombers.

"This will be a significant upgrade of the US nuclear capability in Europe," said Hans Kristensen, a nuclear weapons expert at the Federation of Nuclear Scientists. "It flies directly in the face of the pledges Obama made in 2010 that he would not deploy new weapons."[source]


Your trailer of the day.

Wed, 05/08/2013 - 17:52 | 3542717 NoWayJose
NoWayJose's picture

So today's junk bonds have the same yield as US 10 year bonds in 2007? Without TARP and QE(s), both should be considered as junk.

Wed, 05/08/2013 - 18:27 | 3542817 Great Depressio...
Great Depression Trader's picture

Stocks reach new nominal highs while junk bond yields hit record lows on the same day! Unlimited money for everyoneeee

Its a bonanza for wall street let the good times roll baby. Been speaking to people with 401s and they are happy happy happy

The reality is that pushing rates lower eliminates the debt burden of governments, consumers and corporations. With debt service ratios getting better this means more money left over for investment and spending. In addition, better market results equate to better funding for public pensions which means less tax on private sector workers. Henceforth the economy will keep humming along.

Enjoy the good times while they last. Who knows how long the government debt bubble can last. If the EU can hold humpty dumpty together then the ponzi will continue indefinitely. Despite the doomers proclamations the US central planners have kept the ship humming forward.

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