Sunday, May 1, 2016

Junk Bonds Are a Creature of Falling Interest Rates

Man, Gundlach is a lot smarter than Bill Gross.

Posted by CP at 11:52 AM

1 comment:

Anonymous said...

He makes a valid point, but perhaps a bit oversimplified. One factor at play with high yield is that duration is shorter than for investment grade/treasury bonds which tends to work in favor of the investor.

There is a related point beyond my ability to articulate here that the likelihood that we experience an interest rate environment like that of the 1970s is remote and almost inconceivable in the life of most existing high yield instruments today.

Personally, I'd be more worried about the credit risk in the high yield asset class than what might happen if treasuries shoot up to 15%.

May 3, 2016 at 8:22 AM

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