1st Time Ever Junk Bond Yields Now Beneath CPI Inflation Sign Overcrowded Industry? – Funding Watch

For the primary time ever, Junk-Bond Rally Pulls Yields Beneath Inflation www.wsj.com/articles/junk-bon…

Inside of best 2-3 months after company bond and credit score markets iced up up utterly in February and March 2020, Wall St bond salespeople restarted promoting (and extending) huge quantities of junk bonds, leveraged loans and different poisonous sausage OTC derivatives.

Now too many hedge price range and circle of relatives workplaces are lengthy junk bonds on leverage (almost definitely greater than Archegos). However they aren’t lengthy junk bonds for source of revenue or yield however relatively for capital good points and having a bet that the Fed will bail them out if their over leveraged, overcrowded bond trades blow up.

As a result of plenty of hedge fund managers are lengthy junk bonds (the usage of leverage) for capital good points. They’re having a bet that the worst case situation is that the Fed buys them for 100 cents at the Buck prior to they pass to 0. Handiest retail buyers are purchasing junk bonds for yield. Skilled cash managers are purchasing junk bonds for capital good points the usage of 8x or extra leverage at the trades… What may be able to pass flawed? (sarcasm)


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