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| BondsOnline.com: instant access to and extensive coverage of over 3.5 million stocks, bonds, indexes and other securities covering major and emerging markets and exchanges across the globe. |
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| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| More |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Riskiest Junk Bonds Shrug Off Distress as Debt Market Recovers |
By Bryan Keogh and Sapna Maheshwari
Jan. 5 (Bloomberg) -- The lowest-rated corporate bonds rallied above so-called distressed trading levels for the first time since January 2008 on optimism the economy is recovering.
The average yield on U.S. bonds rated CCC or lower tightened to 9.82 percentage points more than similar-maturity Treasuries, from as much as 36.7 percentage points in March, according to Merrill Lynch & Co. index data. The debt has been distressed, or trading at a spread of at least 10 percentage points, since Jan. 8, 2008, the data show.
Bonds rated CCC+ or lower by Standard & Poor’s have returned a record 124 percent since March, helping the riskiest companies refinance their debt and extend maturities, as ratings firms cut their default forecasts and the U.S. economy grew the most in two years in the third quarter. New York-based S&P forecasts the U.S. default rate to drop to 6.9 percent by September, from 10.9 percent last month.
“Spreads collapsed dramatically in 2009 and will probably continue to do so,” said Jeffrey Kleintop, who helps oversee about $278 billion as chief market strategist at LPL Financial in Boston. “It’s still a great time to be in high-yield, including triple Cs.”
Credit markets are improving as traders speculate the longest recession since the Great Depression is easing and as the U.S. government and Federal Reserve lent, spent or committed at least $8.2 trillion to the economy. U.S. gross domestic product rose 2.2 percent from July through September, according to revised data the Commerce Department released on Dec. 22.
Spread Tightening
“We think there’s probably another 100 basis points of spread tightening for high yield bonds in 2010, so you add that to very attractive yields already, and it remains one of our favorite asset classes,” Kleintop said.
The average spread on high-yield bonds of all ratings narrowed to 6.34 percentage points from 18.86 percentage points in March, Merrill data show.
The so-called distress ratio, or percentage of high-yield companies with spreads of 10 percentage points or higher, fell to 15 percent as of Dec. 31 from more than 70 percent at the end of March, when the credit-market rally began in the first quarter, and a record 88 percent a year ago, Merrill index data show. High-yield or junk bonds are rated below BBB- by S&P and Baa3 by Moody’s Investors Service.
Investors should buy higher-quality junk debt because the rally has made the lowest-rated securities a “little bit rich,” said Andrew Feltus, who oversees about $8 billion in high-yield debt at Pioneer Investment Management Co. in Boston.
“It’s about getting the right triple Cs,” said Feltus, whose Pioneer Global High Yield Fund has beaten 98 percent of its competitors this year. “The thing for 2010 is it’s going to be more of a stock picker’s market in the high-yield market.”
--With assistance from John Glover in London. Editors: Andrew Reierson, Michael Shanahan
To contact the reporters on this story: Bryan Keogh in London at +44-20-7330-7124 or bkeogh4@bloomberg.net; Sapna Maheshwari in New York at +1-212-617-5117 or smaheshwar11@bloomberg.net
To contact the editors responsible for this story: Paul Armstrong at +44-20-7330-7185 or parmstrong10@bloomberg.net; Alan Goldstein at +1-212-617-6186 or agoldstein5@bloomberg.net
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| Stuff to look at |
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S&P Commentary and Newsletters: S&P
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Income Security Recommendation January 2013 Issue.
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