Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

High Yield Junk Bonds Are Hot Again -- Despite Warning Signs

Interest-Rates / Corporate Bonds Aug 04, 2020 - 04:45 PM GMT

By: EWI

Interest-Rates Default rates of low-grade corporate debt are rising

The demand for junk bonds is running high among global investors -- again.

As the Wall Street Journal noted on June 9:

Europe's riskiest corporate debt has rallied to pre-crisis levels.

Elliott Wave International's July Global Market Perspective, a monthly publication which covers 40-plus market worldwide, showed this chart and said:


The Bloomberg-Barclays Pan-Europe High Yield Total Return Index has retraced nearly 80% of its prior drop. Accordingly, the spread between European junk bonds and government debt narrowed to its lowest level since March 6, 2020. "When deals have come in the high-yield market in Europe, they have been well received," notes one credit strategist with JP Morgan Chase.

Yet, here's what's noteworthy: Global investors are swooping up risky corporate debt despite the fact that they've been warned of possible impending hazards.

As the July Global Market Perspective goes on to say:

[A] symptom of pervasive complacency is that investors are snapping up junk bonds despite a widespread understanding that default rates will skyrocket. According to estimates by S&P Global, the default rate for European speculative-grade corporates will hit 8.5% by March 2021, a three-fold increase from today's rate. In the United States, Moody's Investors Service expects the trailing 12-month default rate to hit 11.1% by March 2021. Goldman Sachs puts the percentage higher still -- at 13% before the end of 2020. More important, default rates are rising despite the concerted attempt by worldwide central banks to backstop the market. In April, the U.S. Fed began to purchase the debt of so-called fallen angels, which are companies that lost their investment-grade rating during the pandemic. The European Central Bank is about to follow suit. In June, ECB official Olli Rehn told reporters that he was keeping an open mind about implementing the same policy.

Junk bonds are issued by companies with the weakest balance sheets. Investors' claim on assets in the case of bankruptcy is usually next to the bottom rung, one notch above equity holders.

But, because the trend in junk bonds often aligns with the trend in equities, when stocks rise, indicating increasing appetite in "risk assets," so do the prices of junk bonds.

Of course, this also suggests that junk bond investors everywhere should be highly interested in the trend of global stock markets.

Elliott Wave International's analysts also cover other financial markets and economies worldwide.

Indeed, EWI has put together a free resource titled "5 Global Insights You Need to Watch."

Specifically, EWI's top 5 global experts share their latest forecasts for cryptocurrencies, crude oil, interest rates, deflation, and the future of the European Union.

It's all in a short, 5-video series (plus, two quick reads). In just 13 minutes, you get insights into markets and factors that can have a major impact on your investments.

These are the kind of insights only Elliott wave analysis can give you.

And -- you get it free with a fast Club EWI signup. Club EWI is the world's largest Elliott wave educational community and membership is also free.

Get started by following this link: "5 Global Insights You Need to Watch."

This article was syndicated by Elliott Wave International and was originally published under the headline "Junk" Is Hot Again -- Despite Warning Signs. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in