Gavekal Capital: How Much Tighter Can Junk Spreads Get?

Thursday, June 5, 2014

How Much Tighter Can Junk Spreads Get?

The chase for yield has driven the the spread between junk bonds and AAA bonds to a 20-year low level of just 79 points.

This has happened at the same time as the AAA-10-year spread has widened. The Junk-10-year spread remains historically tight.

Somewhat surprisingly with spreads so tight, the high-yield market isn't a screaming sell at the moment. However, when one looks at real junk bond yields, it does look to be extremely overvauled

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