Are Junk Bonds Signaling A Swing in the Capital Markets?
Junk bonds, also known as high yield debt, issued by those companies in less than sound financial condition, have always accounted for a large portion of the credit pie. During the recent turmoil, debt was hard to sell. Even companies with the prestigious AAA credit ratings from the rating agencies often paid a substantial amount to shore up their balance sheet. If the healthiest companies found it hard, one could only imagine how hard of a job it was for those seeking to sell their “junk” to shore up their finances. The junk bond market literally came to a halt as the collapse of the nation’s large financial institutions destroyed liquidity for the better part of 2008. However, April 2009 has signaled a better time for debt and especially such high yield. With investors willing to take on such risk, is this a sign of a sustained swing in the capital markets? The one thing I can tell you about the markets is to do your homework and never base a judgment off one piece of good news. I im
