Nevertheless, Moody’s Investors Service has pointed out that default rates remain low, with 1.85% of U.S. junk-rated companies defaulting in the year ended Aug. 31, compared to 14.1% at the end of 2009.
“We still hold the view that the underlying fundamental backdrop is favorable for credit…. So when the current weakness ends, we look for HY to recover and spreads to narrow,” Adrian Miller of GMP Securities said, according to Barron’s. “However, given the nature of the current geopolitical concerns, these events are not going away anytime soon and could continue to weigh on the HY market over the near term.”
iShares iBoxx $ High Yield Corporate Bond ETF
For more information on the speculative-grade debt market, visit our junk bonds category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of HYG and JNK.