Super-Junk Leads the 2019 Asset Revival

-edited

The stock market is unlikely to crack until speculation in junk bonds gets blown out of the water.

The high-yield index hit record highs on Powell's dovish Fed outlook. The lowest-rated debt has led the charge with 6% returns this year.

Bloomberg reports Junk Bonds Rage as Clear Channel Sells Biggest CCC in Months.

High-yield debt has already proven to be one of the best-performing asset classes in fixed income this year, led by CCC rated bonds that have so far returned just over 6 percent, Bloomberg Barclays index data show.

Junk bonds and speculative risk taking go hand in hand with stock market gains. With that thought, let's discuss take a look at bond ratings to see what's delivering the gains.

CCC Debt Leads the Revival

CCC rated "garbage" one or two steps above "default imminent" is leading the rally.

What's Powell going to do for an encore? Buy junk bonds?

Mike "Mish" Shedlock

Comments (12)
No. 1-9
gregggg
gregggg

He'll have to start dropping the window rate.

abend237-04
abend237-04

I can only gape in awe. My favorite wordsmithing of this time in history is by David Stockman, "...widows and orphans cliff-diving for yield..."

thimk
thimk

Stock prices have reached a permanently high plateau. /sarc

killben
killben

"What's Powell going to do for an encore? Buy junk bonds?"

The Fed might do just that if they have to.

The Fed will be trying all it can (more QE, negative interest rates, buy all you see etc.) to make sure stock prices that have reached absurd levels remain perched there. After all, as far as the Fed is concerned stock market level is the yardstick that measures their policy's success. So we can be sure of some more deranged monetary policy from the Fed.

Mish
Mish

Editor

I can only gape in awe. My favorite wordsmithing of this time in history is by David Stockman, "...widows and orphans cliff-diving for yield..."

I spoke with Stockman on the phone today - I will pass that on

Bam_Man
Bam_Man

The upcoming global recession will simultaneously pop both those bubbles in short order.

ReadyKilowatt
ReadyKilowatt

"How about the Fed stops interfering with the business cycle and price discovery?"

I thought the Fed really was the root cause of the business cycle.

Ted R
Ted R

Some people will do anything to keep a bankrupt economy alive just a little longer.

Casual_Observer
Casual_Observer

This feels like the dip in 2007 which had a huge gain for a few months before capitulation. The lack of expectation of any downside and fed bailouts forever is no different than a centrally planned private economy. The pain cant be deferred forever.