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Bond Market’s CCC Love Affair Fades as Yield Chasers Hit Wall

April 23, 2021, 4:35 PM

This year’s hottest credit trade is starting to lose its luster, with ever-decreasing yields on the riskiest U.S. debt crushing the potential for gains.

Investors betting on recovery in pandemic-battered sectors like energy and retail have been rewarded with a total return exceeding 4% on CCC rated bonds, compared with less than 2% on junk overall, and a loss of more than 3% in high-grade debt so far this year. But CCC spreads fell to the lowest since summer 2007 this week, causing some to take chips off the table.

“You don’t want to be the last one holding the...

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