Brian Chappatta, Columnist

Junk Bonds Aren’t Going to Save You

Within the high-yield debt market, familiar cracks are starting to emerge.

October 25, 2018 at 9:00 AM UTC

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

No shelter from the equity-market storm.
Photographer: Michael Nagle/Bloomberg

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In the midst of this month’s stock-market tumult, it might be tempting to look at total returns on U.S. high-yield debt and conclude that all is well in the bond market’s junkyard.

After all, speculative grade U.S. corporate bonds are practically the only segment of the global debt market that remain positive for the year, according to Bloomberg Barclays data. It’s been a rough October for high yield, to be sure, but its 1.21 percent decline as measured by Barclays pales in comparison to the 9.1 percent drop in the wide-ranging S&P 1500 Index, which combines the S&P 500, MidCap 400 and SmallCap 600 indexes. Even the riskiest credits of all, those rated CCC, have managed to hang in there — so much so that Bloomberg News recently concluded that junk credit investors are barely flinching at the violent swings in stocks.