Sunday, June 1, 2025

Latest

US Junk Bond Yields Fall Below 4% For First Time In History Amid Unprecedented Buying Spree

For the first time ever, the US junk bond average yield fell below 4%, as a frenzy of investors piled into junk bonds in search of higher returns.

The asset class, which has always been known for its high yields at the expense of high risk, has seen an unprecedented level of demand over the past several months. Yield-hungry investors have been flocking to the junk bond market in search of higher returns, after loosing appetite for the “not so high” yields offered by lower risk bonds, such as Treasury’s. As a result, the Bloomberg Barclays U.S. Corporate High-Yield index dropped to 3.96% on Monday, marking the sixth straight session of declines.

The soaring demand for junk bonds, many of which have notably been backed by the Federal Reserve (which in 2020 indulged in a buying spree of numerous high yield ETFs), has even spilled into the riskiest rated CCC tier, forcing supply levels to record-lows. In fact, the demand for debt rated CCC has exceeded supply so much, that some money managers have begun instructing companies to borrow, rather than wait for deals to emerge.

As Credit Suisse points out, the growing fondness for the lowest quality paper has lead to a surge in issuance, as January recorded $8.2 billion in CCC supply — the most active month for the tranche since the financial crisis. With bonds rated CCC significantly outperforming the remainder of the market for three straight months, it means there is essentially no difference between the numerous junk bond tranches, with notes rated BB averaging a yield of 3.05%, and single-B notes yielding around 4.3%.

Although the barrage of junk buying has ignited optimism amongst zombie companies that can now delve into further cash burning to fund their subsistence, the entire situation sends a strong signal to investors holding bonds at the top of the market: even the slightest bump in the road would send yields surging. However, it appears that even the institutional investors have no cause for concern — in fact, some of them want the junk bond party to continue on.

According to TwentyFour Asset Management head of US credit David Norris, CCC bonds may be the best kind of credit this year yet: “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,” he told Bloomberg. However, momentarily plummeting back to the fundamentals, suggests that the party will only continue… as long as the central bank continues funneling billions of dollars into the market.


Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply

Video Articles

Wesdome Gold Q1 Earnings: Cash Flow Is King!

Solaris Resources: The Royal Gold Financing Package

How a Single Deal Turned 2 ‘Dead’ Mines into a $2B Project | Canadian Copper PEA – Simon Quick

Recommended

Brazil Potash Completes Site Prep For Port Terminal

Silver47 x Summa Silver: Creating An Explorer With A Billion Ounce Goal

Related News

Junk Bond Spreads Ignore Weak Economic Data

Despite signals the economy may be slowing, including a persistently inverted Treasury yield curve and...

Monday, June 5, 2023, 06:46:00 AM

US Junk Bonds Lose Lustre As Inflation Fears Mount

The US junk bond market is showing signs of faltering, as investors’ inflation fears grow,...

Wednesday, June 2, 2021, 10:55:00 AM

China Junk Bond Yields Continue to Hit New Highs; Equity Investors Yawn

Over the last eighteen months, equity investors have concluded that the stock market is a...

Saturday, October 9, 2021, 09:00:00 AM

What Are Current Bond Spreads Telling Us About The Economy?

Continuing a pattern which began in the early fall of 2022, and which has accelerated...

Monday, February 6, 2023, 11:58:00 AM

US Junk Bond Market Soars to New Record as Excess Liquidity Prompts Investors to Seek Higher Yields

The US junk bond market has once again swelled to a record-breaking size, thanks to...

Sunday, October 31, 2021, 11:01:00 AM