In Bonds, The Junkier The Better

Investors are stampeding to high yield. But are they setting themselves up for a fall?

It's one of the supreme ironies of today's markets. Equity investors, usually thought of as risk-takers, keep pouring money into blue chips such as General Electric Co. and Coca-Cola Co. while giving short shrift to second- and third-tier stocks. Yet bond investors, generally thought to be risk-averse, are taking a dim view of blue-chip bonds, such as U.S. Treasuries. Instead, they are snapping up the debt issued by those second- and third-tier companies: junk bonds.

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