Every once in a while, people don't just invest in an asset; they swarm it.
That's what has been happening to junk bonds. Goaded by the monstrous returns on junk—53% this year—and the miserable yields on cash, investors have put well over $20 billion into high-yield bond funds in 2009.
"The inflow of funds has been phenomenal," says Daniel Fuss, manager of the $18.5 billion Loomis Sayles Bond Fund. "I have not seen a rally like this, ever, in the high-yield market." Mr. Fuss bought his first junk bonds more than 40 years ago.
As they so often do, investors are piling in even as the party may be starting to wind down.
There have been plenty of reasons to party. A year ago, in the depths of the financial crisis, the bonds of below-investment-grade companies traded at an average of only 61 cents on the dollar, about as cheap as they have ever been
1 comment:
I think what the junk bond market has done for the economy is a great step forward, however I think for most people who have not already taken advantage of investing in certain junk bonds they have "missed the boat" already. However, this is not to say that if you believe that the current recession will continue to recover at a slow pace and you can find a junk bond worth investing in, then you should do it.
Post a Comment