June 4, 2021
Junk bonds have been riding the rally like many other financial sectors since the collapse at the start of the pandemic. Since the recession, high-yield bonds have been what investors have used to get excess returns while avoiding volatility, but the excess yield investors are looking for is being erased. Yields have been flat in May, meaning the spreads between treasuries are narrowing. Money is flooding out of junk bonds as investors are worried about Taper Tantrum 2.0—when the Fed would pull back bond-buying in a stimulating economy. Rising inflation hasn’t been a concern for junk bonds, which are insulated compared to much other fixed income, but the Fed response could be a huge problem for high yield bonds.
(New York), Financial Times
FINSUM + Magnifi: This is difficult because you need both high inflation and a Fed overreaction. If you think the Fed will sit calmly, you may benefit from junk bond exposure.
Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. As of June 2021, 380,000+ users with $534+ Billion in Assets Under Influence, have used Magnifi over 3,800,000 times. Try it for yourself today.
This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. [As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide brokerage or custody services.]