Air escapes from the junk-bond bubble

In the easy-money era of the past few years, one of the most eye-catching bull runs has taken place in the highest-risk part of the corporate bond market, known as junk bonds.

Corporate debt with high yields, reflecting a higher risk of default, has been so popular that yields have plummeted as prices have surged. According to Barclays, average junk-bond yields hit a record low of 4.8% in June.

In the pre-crisis era, that would have been the yield on a bond issued by a government with solid finances, as opposed to a risky company. Junk bonds are “extremely [...]

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