| 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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| 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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High-yield junk bonds are a choice for risk-taking savers |
USA TODAY - July 23, 2010 - by John Waggoner
n congressional hearings this week, Federal Reserve Chairman Benjamin Bernanke said that the central bank would keep short-term interest rates near zero for the foreseeable future. That's swell if you're a borrower, but hell if you're a saver.
How do you get a decent yield these days? By taking on more risk, which is why junk-bond funds have become so popular. But are they a good idea? Possibly — at least until the next credit meltdown.
ON TWITTER: Follow John Waggoner
The economy is slower than a snail on crutches, and the Fed has kept rates low to try and keep the economy from slowing further. Low rates let companies and consumers refinance older, more expensive loans. And low rates help companies to borrow for expansion, although few companies are taking out new loans now.
If you're looking for a safe, high-yielding investment, however, you're out of luck. The average money market mutual fund yields 0.04%, or $4 a year for every $10,000 you invest, says iMoneyNet, which tracks the funds. The top-yielding one-year bank CD pays 1.55%, according to Bankrate.com. Woo.
If you're trying to get more interest from your investments, you have two ways to do so. The first is to lock up your money longer. Bankrate's highest-yielding five-year CD, for example, pays 3.05%, or $305 from a $10,000 investment.
And that's about as good as you're going to get without taking on the risk that your investment won't pay off at maturity. A 10-year Treasury note, for example, yields 2.93%.
To get higher yields, you have to take on even more risk, which means investing in corporate bonds. These are long-term, interest-bearing IOUs. The company will pay you a set amount of interest until the bond matures, at which point you'll get your principal back.
The risk, of course, is that the company will go bankrupt before the bond matures. For most large, financially strong companies, that's not a large risk.
Unfortunately, you don't get much return from high-quality corporate bonds these days, either. High-grade corporate bonds yield about 1.32 percentage points more than comparable Treasury securities, Moody's Investor Services says. The five-year T-note yields 1.67%, so a five-year corporate note would yield about 3%.
To get really high yields, you have to take considerably higher risks and invest in junk bonds — long-term, high-yielding loans to companies with poor credit records. What are the risks?
•Defaults. The peak default rate for junk bonds was 14.5%, set in November, according to Moody's. It was 6.3% in June — better, but not great, either.
•Losses. During the worst 12-month period for high-yield bond funds, which ended last November, the average junk fund lost 30%, including interest.
The rewards: Junk bonds now yield about 8.43%.
Defaults — and losses — will increase if the economy falls back into a deep recession. Most managers, however, think the economy will muddle along in a slow-growth period. "The very clear prognosis is that, at best we'll be in a slow economy for a long time," says Greg Hopper, manager of Artio Global High Income.
For the complete article visit USATODAY.com
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