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Bob Carey
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  Sell-Off in High Yield Corporate Bonds Pushes Yields Back to Longer-Term Norm
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Past Performance is no guarantee of future results.

View from the Observation Deck

  1. The yield on the Merrill Lynch High Yield Master II Index reached 9.63% on 9/30/11, up from 7.29% on 4/29.
  2. Since 9/30/03, the average yield on the index (month-end data points) was 9.49%. 
  3. Prices of the bonds in the index fell 9.88% from 4/29/11-9/30/11, according to Bloomberg.
  4. While investors are obviously concerned about Greece's debt problems the primary focus here should be U.S. corporate debt.
  5. The default rate on speculative-grade debt was 5.3% in 11/03, well above the 2.1% rate in 8/11, according to Moody's. 
  6. Moody's expects the rate could fall below 2.0% by 12/11. The historical average for the default rate is close to 5.0%.
  7. For comparative purposes, the index's 9.63% yield is now in line with the 9.87% average annual total return on the S&P 500 since 1926.
Posted on Wednesday, October 5, 2011 @ 9:12 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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