Dividends4Life: Is The Junk-Bond Run Over?

Is The Junk-Bond Run Over?

Posted by D4L | Thursday, February 24, 2011 | | 0 comments »

They have been the income-producer of last resort for a year now, offering investors much better returns than the typical savings accounts or ho-hum dividend stocks. But with yields on high-yield bonds hitting historic lows, even pros in the business are starting to ask: should these bonds be a part of an investor's portfolio?

After a two-year, unprecedented bull run, the average yield on high-yield (or junk) bonds hit 6.8%, according to the Merrill Lynch High Yield Master II Index, marking a new low after a two-year unprecedented run for the riskiest corporate debt. Investor demand has pushed up the prices on high-yield bonds, which has caused yields to plummet. But compared to the rest of the fixed-income market, junk bonds still look appealing. The average yield on all investment grade corporate bonds is 4.9% and 10-year Treasury bonds are yielding just 3.6%, according to Standard & Poor's Global Fixed Income Research.

Source: Market Watch

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