Has anyone been taking a look into high yield coporate bonds in this environment?
I wouldn't invest my entire nest egg into one bond, but the Ishares ETF HYG or the SPDR equivalent JNK, have extremely high yields (~13%) and are quite diversified.
Of course there will be defaults since we are talking junk bonds, but in this environment, where many people have been scared out of the equity market AND the corporate bond market, this might be the time to stock up on some beefy yield.
With everyone piling into the security of government bonds and blue chip bonds, the yields have been driven further and further down to the point where they'll be hard pressed to beat inflation down the road.
Further to that, we now have the ratings agencies (Moody's, S & P), who were burned badly with their mortgage ratings, now jumping in the opposite direction and are turning ultra conservative. I think this could indicate that some companies are possibly being unfairly downgraded.
Obviously junk bonds aren't for everybody, and obviously there is risk as with any investment. But in my opinion, investors in these funds are being fairly paid for the risk that they inherit.
Anyways, I'm just wondering if anyone else has had the same thoughts?
I wouldn't invest my entire nest egg into one bond, but the Ishares ETF HYG or the SPDR equivalent JNK, have extremely high yields (~13%) and are quite diversified.
Of course there will be defaults since we are talking junk bonds, but in this environment, where many people have been scared out of the equity market AND the corporate bond market, this might be the time to stock up on some beefy yield.
With everyone piling into the security of government bonds and blue chip bonds, the yields have been driven further and further down to the point where they'll be hard pressed to beat inflation down the road.
Further to that, we now have the ratings agencies (Moody's, S & P), who were burned badly with their mortgage ratings, now jumping in the opposite direction and are turning ultra conservative. I think this could indicate that some companies are possibly being unfairly downgraded.
Obviously junk bonds aren't for everybody, and obviously there is risk as with any investment. But in my opinion, investors in these funds are being fairly paid for the risk that they inherit.
Anyways, I'm just wondering if anyone else has had the same thoughts?