Junk-Bond Risk Gauge Jumps as China Meltdown Adds to Energy Rout
- Premium on high-yield debt approaching most in three years
- The goal is to `avoid land mines' with oil at 12-year low
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Junk-bond investors coming off their first losing year since 2008 are in the crosshairs again, as a stock-market meltdown in China and a plunge in oil prices cloud the outlook for debt sold by the least credit-worthy companies.
The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 speculative-grade companies, surged as much as 21 basis points to 516 basis points, rising toward the highest mark in three years. The average borrowing costs for the riskiest portion of the high-yield market surged to 18.4 percent, Bank of America Merrill Lynch index data show, a level not seen since 2009.