, Columnist
30% Junk Rally Gives Traders Heartburn
Oil prices and central banks aren't reliable momentum builders.
This article is for subscribers only.
It's becoming difficult to see how the lowest-rated U.S. junk bonds can continue to rally.
They've posted their best performance since 2009, with more than a 30 percent return so far this year. And now investors from Goldman Sachs Asset Management to Highland Capital are starting to become nervous about this debt, and with good reason: If there's any sort of economic shock at all, these notes are poised to lose a lot. And some sort of shock is entirely possible in the near future.
These notes have benefited from two overwhelming factors this year:
1) New stimulus efforts in Japan and Europe have pushed investors into the most-speculative notes, especially those in the U.S.