Risk Builds as Junk Bonds Boom
(Deja Vu all over again! gd)
Money market funds pay next to nothing. Interest rates on United States Treasuries are dismal. The volatile stock market has been dead money for more than a decade.
But on Wall Street — as the old saying goes — somewhere, someone is making money. And these days, that somewhere is junk bonds.
The market for junk bonds, risky corporate debt that pays high interest rates, is red hot. Such debt, also known as high-yield bonds, has returned 10.2 percent year-to-date, according to a JPMorgan high-yield index. Junk bond funds are on a pace to take in a record amount of money this year. Companies with less than stellar credit are issuing hundreds of billions of dollars of bonds.
Fueling this frenzy are investors of all stripes — including individuals, mutual funds and state pensions — who are desperate for returns in their bond portfolios and willing to take more risk to get them. Demand is insatiable, even as analysts warn that the market has become overheated and is ripe for a fall.
http://dealbook.nytimes.com/2012/08/15/risk-builds-as-junk-bonds-boom/?nl=todaysheadlines&emc=edit_th_20120816
