Investors Piling Into Junk Bonds Could Be Overlooking Warning Signs
- Yields on high-yield bonds close to less-risky loans
- This convergence is a sign ‘risk-reward is getting skewed’
MIT's Pozen Warns Investors on Junk Bond Rate Risks
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More warning signs are flashing in the junk-bond market.
Investors that have been loading up on the securities as an alternative to ultra-low interest rates are now barely getting paid more than higher-ranking bank lenders, who would typically get their money back first in the event of a default. The difference in yields between junk bonds and the more senior leveraged loans is the narrowest in two years, data compiled by Bloomberg show.