Junk-Bond Buyers’ Reward Over High-Grade Is Smallest Since 2020

Money managers who buy junk bonds instead of high-grade debt are getting the smallest compensation for taking that risk since before the pandemic.

Risk premiums on the highest tier of junk bonds were just 0.72 percentage point more than for the lowest levels of investment-grade corporate bonds at the end of December, according to data compiled by Bloomberg. Although that figure has edged higher in recent days, it is still well below levels at the start of 2021, when it was closer to 1.46 percentage point.

For much of the pandemic, buying junk bonds meant getting paid significantly wider ...