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Subprime Angst Fades as 12% Return Trounces Junk: Credit Markets

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Remember when nobody wanted to touch U.S. subprime-mortgage debt? That’s just a distant memory as it delivers some of the bond market’s best returns.

The securities that were created in the years before the financial crisis in 2008, which marked the last time they were issued, have gained almost 12 percent this year, or six times more than junk-rated corporate debt, according to Barclays Plc. After contributing to the collapse of Lehman Brothers Holdings Inc., bonds tied to the riskiest home loans have returned 75 percent since 2010, topping speculative-grade corporate debt for three straight years.