垃圾债券回归(1) Junk bonds are back , and packaged in a format designed to appeal to today ' s investors and get away from their seamy 1980 s-era reputation . While bond funds are nothing new , junk bond exchange-traded funds ,
which aim to mirror the makeup and performance of a particular index , are having a moment . Low interest rates driven by Federal Reserve policy has encouraged companies to borrow - leading to a record $ 51.5 billion of junk bonds issued in June .
Investors , hungry for decent yields , seem unable to get enough . On average , junk bonds yield 4.77% , compared to less than 1.1% for bonds overall .
The four largest high-yield ETFs , which collectively total $ 51.6 billion , saw net inflows of a combined $ 13.9 billion year to date through July 21. The Morningstar US High-Yield Bond Index rose 10.3% in the second quarter .
So What are junk bonds ? Some quick background : Companies can raise money by issuing equity ( stocks ) or debt ( bonds ). Corporate bonds are rated for creditworthiness by the big ratings agencies .
The ones that fall below BB class as ranked by S & P ( or Baa using Moody ' s ranking system ) are termed " high-yield ," a . k . a . junk bonds , in contrast to lower-risk " investment grade " issuances .
Bonds that fall into junk territory are deemed to pose at least some risk of being unable to meet their financial obligations in the long or short term , with lower-rated bonds at a greater risk of near-term default .
As tempting as high-yield debt might seem , especially given the paltry returns on safer investment vehicles like Treasuries , advisors say this isn ' t an asset class for the inexperienced . " When you move to the credit markets -
and the high-yield portion of the market - you really have to balance the yield opportunity with the risk of principal loss ," says Bob Boyd , managing director at Pacific Asset Management .
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