Junk Bonds Endure an Awful Day But Live to Tell About It
The high-yield market is probably on hold until January.
It’s painful, but not apocalyptic.
Photographer: Michael Webb/Hulton Archive/Getty Images
Bond traders have a technical name for what just happened to the U.S. high-yield bond market. They call it a “puke.”
The yield spread on junk bonds widened 33 basis points on Thursday, the biggest jump in more than seven years, to 508 basis points, according to Bloomberg Barclays data. As recently as Dec. 14, high-yield investors were holding on to a slight gain for 2018. Now they’re down 2.2 percent, on track for the first annual loss since 2015. Funds tracking U.S. corporate high-yield debt lost $788.5 million in the week ended Dec. 19, the fifth consecutive week of outflows, according to Lipper data. That followed a massive $2.06 billion withdrawal the previous week. And speculative-grade borrowers are steering clear of the meltdown entirely: December is shaping up to be the first month in 10 years with no bond sales.