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Junk Debt Drops Below 5% Yield For First Time On Record
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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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.
At this price Milken could buy the whole fucking world. You know he has thought the same.
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...
I'd keep my gold out of it too...if I could ever find it again. That last boating trip was a real downer.
I'm actually thinking that today.
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!
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.
Chase that yield, bitchez. Chase that yield.....
I guess it is only revision to the mean - you know - when everything is junk.
Junk Debt ranks right up there with "Military Intelligence" as a classic oxymoronic phrase.
...sort of like "science of ecnomics" ?
You mean like the "nobel" prize in economic science which is sponsored and awarded by the world's oldest central bank?
they gonna hold this btch up for another 30 mins?
No mis-pricing of risk to see here. Move along.
Risk? Why as long as there's still capital left to consume, risk is off the table.
The long-term average for the 10-Year is 6.61%. This is getting unreal.
welcome to the wonderful world of the 10y JGB
this is why you just HAVE to own dividend paying stocks. because clearly they are not in a bubble.
How is this explained to Joe Kernan?
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.
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.
You're going to see even more amazing things ahead. No doubt about it.
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.
The world's biggest game of chicken, EVAR!
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
No way. They'll all get out at the exact top and pile into GLD. Oh, wait...
The most critical aspect of your return is not spread but the putative preservation of capital
All this excess funny money has to die somewhere....
My god junk below 5%. is it me or is this whole thing fucked?
Well, could be both?
True dat.
Explained by the book: "Road to inflation". Author: Uncle Ben.
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.
Its a miracle of modern economics of course no risk here
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!
The sad part is that junk bonds have a higher chance of paying out par at maturity than 30 year treasuries do.
Not after someone brandishes a nuke or two.
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..?
This bodes well for the elderly...
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***
WTF?
"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...
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.
We don't know. That's why we're watching Shinzo Abe so closely.
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.
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.
They started calling each other "comrade" on Calculated Risk 3 or 4 years ago, before that place turned to the dark side.
Hey Doc,
Please try to appreciate your side of the "Carry Trade"...!! Buck Up and SMILE...!!
We are all Japanese now.
Geisha Slaves To Monetray Policy
"You WILL enjoy your time here and make our guests feel welcome..."
Anyone can handle the exit. Bernanke said so.
If someone called him on it, Ben would exit last night's dinner into his froot of the looms.
But only few will survive He mumbled after that.
Negative yield on US Treasuries. Coming to a world near you soon.
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?
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. :)))
If you did, Obama soon would confiscate it with a new yacht tax.
You musta missed the memo, sunken boats are good for the economy, and clearly bullish for boating stocks.
isnt everything just junk anyway ....
So true, good point seasmoke.
... bubble for sure ...
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.
Junkers headed to half that...my bank now wants me to pay them interest for holding my declining-in-value bucks.
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
Just the littlest prick on the bubble and a lot of pension funds are in trouble.
Then throw Geithner on the bubble
Tyler, how about an overlay of the spread for us non-Bloomberg Terminal losers?
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.
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.
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.