Bank of America Says Buy Junk Bonds Before ‘Violent’ Rebound

A rout in US high-yield credit markets is creating a buying opportunity in credit derivative indexes and junk bonds, according to Bank of America Corp. strategists.

“The rebound is going to be violent and unforgiving,” Bank of America’s Oleg Melentyev and Eric Yu wrote.

The price on the Markit CDX North American High Yield Index -- which tracks credit default swaps tied to junk-rated companies -- has been falling all month, as high inflation forces the Federal Reserve to tighten aggressively, and investors look to hedge against defaults.

But now the credit derivatives index is cheaper than underlying corporate ...