“My reading of the evidence is that we are seeing a fairly significant pattern of reaching-for-yield behavior emerging in corporate credit,” said Fed Governor Jeremy C. Stein in a CNBC.com report.
PIMCO Total Return ETF (NYSEArca: BOND) manager Bill Gross is also warning of frothy conditions in corporate debt.
“Corporate credit and high yield bonds are somewhat exuberantly and irrationally priced,” Gross wrote in a recent commentary. “Spreads are tight, corporate profit margins are at record peaks with room to fall, and the economy is still fragile.”
iShares iBoxx High Yield Corporate Bond
Full disclosure: Tom Lydon’s clients own HYG and JNK.