In the May 20 Webinar of the CMG High Yield Strategy Steve Blumenthal references an article he wrote in Forbes called Junk Bonds Are The Investment Opportunity Of A Lifetime, Just Not Yet. The Webinar was an interactive elaboration of the observations of the article. Below is an excerpt from that article:
4/3/2015 Steve Blumenthal, Forbes Contributor
An outstanding investment opportunity in high-yield bonds is growing closer. Let’s take a look at what you can do to identify the opportunity and act on it.
High-yield junk bonds can be an attractive asset class but, as the name implies, investing in them does not come without risk. As an investment manager who has traded the trends in high yield for 23 years, I believe high yield will present one of the greatest buying opportunities of our lifetime.
Here’s what’s happening:
- Investor demand for high yield bonds continues to rise. According to Morningstar, mid-February to late-March marked the highest six week level of flows to junk bond funds since the financial crisis in 2008 and 2009.
- The high yield space has increased from $1 trillion to $2 trillion in the last five years.
- Lesser quality companies are receiving funding. More than 55% of speculative-grade debt sold this year was through deals known as private placements for life. Thus, requiring no public registration. In short, very high risk.
- That’s up from 40% last year – a record until now, according to S&P Capital IQ.
- Moody’s reports a two-year high in company debt rated B3 negative or worse.
Read the full article Junk Bonds Are The Investment Opportunity Of A Lifetime, Just Not Yet.