Junk Debt Is Pricey and Shorting Makes Sense Now, Barclays Says
- Bank suggests using single-name CDS to bet against the debt
- Credit derivatives are often tighter than underlying spreads
This article is for subscribers only.
US junk bonds are expensive given the deteriorating performance of many high-yield corporations, and buying credit derivatives on individual companies can be the best way to bet against the debt, according to Barclays Plc strategists.
Risk premiums, or spreads, on junk bonds averaged about 3.85 percentage points on Tuesday, close to the lowest level of the year and below the average of the last decade of 4.3 percentage points. In times of market turmoil, high-yield spreads can reach 7 percentage points or higher.