Junk bond market is 'flashing yellow' as yields rise and spreads widen
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Cracks are forming in the US high-yield bond market: yields have climbed to 8.1% from 7.22% a month ago as investors price in inflation from high energy prices and a deficit that hit nearly $2 trillion in the fiscal year ended Sept. 30. Credit spreads widened to levels not seen since April, reaching 315 basis points, still below March's 346 bps. The lowest-rated segment, CCC and below, shows the most stress, with spreads jumping to roughly 1,250 bps. Chief investment strategist Michael Arone says the market is "flashing yellow" but "far from red," and it isn't yet time to abandon high-yield bonds.
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