Junk Bonds Are Getting Riskier But Spreads Go Tighter

No matter the risk, corporate bond investors just don’t seem to care. US junk spreads are grinding closer to two-year tights, even as underlying credit quality deteriorates.

Fixed-income money managers appear to be positioning for a soft-ish landing, no longer fearing deep recession. Inflation is proving to be sticky, but still trending down, keeping spreads tight.

But the quality of the benchmark US junk bond index is eroding, even as the market shrinks. That makes it inherently more risky and could fuel defaults, according to strategists at Barclays.

What’s keeping buyers engaged is yield of almost 7.9% ...