Marty Fridson Sees Yield Chasers Paying Up in Frothy Junk Market

Investors chasing fat yields in US corporate debt aren’t being properly compensated for the risks, warns junk bond guru Marty Fridson.

“Investors systematically overpay for industries that offer higher-than-median yields,” Fridson, whose debt analysis has been studied by Wall Street for decades, wrote in a report Wednesday. Bond buyers, he added, are “earning inferior risk-adjusted returns.”

Fridson’s analysis points to a growing danger bubbling beneath the surface of the high-yield debt market, where a bullish consensus is underpinned by expectations for robust growth in the US economy. Junk spreads dropped this month to the tightest since the start of ...