logo
  Join        Login             Stock Quote

More Junk Bonds For A Junk Economy

 August 16, 2010 09:52 AM


Corporate borrowers with nary a chance of repaying debt are taking advantage of record low interest rates to sell junk bonds:

U.S. companies issued risky "junk" bonds at a record clip this week, taking advantage of keen investor appetite for returns amid declining interest rates and tepid stock markets.

The borrowing binge comes as the Federal Reserve keeps interest rates near zero and yields on U.S. government debt are near record lows. Those low rates have spread across a variety of markets, making it cheaper for companies with low credit ratings to borrow from investors.

Fixed-income investors are so desperate for yield that they're willing to clear the junk bond market of any and all inventory.  The last time I recall seeing stories like this was Spring 2007, just months before the first panic attacks started hitting credit markets.  We can thank the Fed's gamble on QE2 for returning us to this precipice.  Not everyone at the Fed is happy to gamble with America's solvency:

The Federal Reserve is undertaking a "dangerous gamble" by keeping rates at near zero for so long, and must start raising rates or risk damaging the nascent U.S. recovery, a top Federal Reserve official said on Friday.

Helicopter Ben will stay the course despite dissenters like Thomas Hoenig.  China isn't waiting for any further quantitative easing and is diversifying away from dollar holdings in advance of more Fed purchases of debt.  If only American investors could do the same.  Alas, it's too late for many Baby Boomers to diversify, and what little they have left in U.S. assets won't see them through their retirement years

America's hard times will last a long time.  Prepare for long, lean years by spending less and saving more. 
iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageHow the Chinese Slowdown Will Impact Your Investments

Most countries would find a quarterly growth rate of 7.3% a cause for a read on...

article imageHow To Profit From Foreign Investment In Real Estate

Though investors don't always capitalize on it, history has a way of repeating itself. In fact, when I saw read on...

article imageAnother Round Of Upbeat US Macro Reports

The US economy grew faster than expected in this year’s third quarter, according to this morning’s read on...

article imageDistinguishing The Fed's Securities Purchases From Monetary Expansion

There has been a bit of confusion about what today's FOMC announcement means with respect to Quantitative read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center

Related Articles:

Gold: The Ultimate Store of Value?
More Articles on: Finance



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.