Riskiest Junk Debt Is Lagging as Investors Fret About Software

Investors, worried about artificial intelligence disrupting software companies, are skirting the most-troubled US junk debt even as they embrace risk in other markets.

The lowest-rated junk bonds that often trade, those in the CCC tier, have gained 1.38% this year but are slightly lagging securities in the B and BB tiers, Bloomberg high-yield indexes show. A recent Bank of America credit investor survey showed crowded positions in single and double B for both high yield and loans, according to the firm, “while CCC remains broadly avoided.”

The amount of distressed leveraged loans, or those trading at yields ...