Junk Bonds Are the New High Grade Bonds

Junk debt is about as safe as investment-grade now, at least according to prices in credit markets.

The gap between risk premiums on the highest-rated US junk bonds and the lowest-rated investment-grade notes was hovering around 0.80 percentage point this week, not far from the lowest since 2019. As money managers brace for the Federal Reserve to start cutting rates, they’ve grown willing to accept lower and lower yields compared with government debt.