Junk Debt Rebounds as Investors Buoyed by Fed Pledge
This article is for subscribers only.
Demand for junk-rated debt is bouncing back from a selloff triggered by plunging oil prices on optimism that the Federal Reserve will be in no rush to raise interest rates next year.
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, declined 14.7 basis points to 354.3 basis points. That follows yesterday’s drop resulting in the biggest two-day decline for the index since January 2013. The average yield on speculative-grade debt contracted for the first time this month on Dec. 17 dropping to 7.1 percent, according to Bank of America Merrill Lynch index data.