Junk-Bond Yields Show U.S. Can Handle Tightening

AA-rated bonds now yield less than AAA-rated debt, signaling that optimists are winning the debate over whether the economy can survive the end of monetary stimulus.

Since the beginning of June, bonds with lower credit ratings have done better than ones with higher ratings. This supports the view that interest rates are rising because the U.S. economy's prospects are improving. While those who worry that the Federal Reserve might endanger a fragile economic recovery may yet be proven right, the evidence is leaning toward the cautious optimists -- so far.

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