Bloomberg Anywhere Login


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Junk-Bond Buyers Overreaching as Yields Approach Lows, BofA Says

Aug. 7 (Bloomberg) -- Bank of America Corp. warned investors not to overreach in the junk-bond market as company inventory costs outpace revenue growth, threatening to end a rally that has pushed yields to almost record lows.

Revenue growth for the more than 200 high-yield, high-risk issuers that have reported their second-quarter results was 1.5 percent, compared with a rise in inventory costs of 2.2 percent, Bank of America credit strategists led by Hans Mikkelsen and Oleg Melentyev in New York wrote in an Aug. 6 report.

“This is not a sustainable state of affairs, and we would expect to see further steps in addressing cost structures going forward, meaning further cutbacks in payrolls, new orders” and capital expenditures during the three months that will end Sept. 30, the analysts wrote. “While the bid for high-quality yield is understandable in this environment, we question the extension of this reach into the economically and risk appetite-sensitive portions of the credit spectrum.”

The so-called yield-to-worst for U.S. junk bonds are 20 basis points, or 0.2 percentage point, above the record low average of 6.7 percent, the strategists for the Charlotte, North Carolina-based bank said. The measure, which takes into account the risk that bonds will be redeemed early, leaves little opportunity for price gains, they said.

Junk bonds, rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s, have returned 9.7 percent this year, according to Bank of America Merrill Lynch’s U.S. High Yield Master II Index.

To contact the reporter on this story: Matt Robinson in New York at

To contact the editor responsible for this story: Alan Goldstein at

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.