Junk Bonds Are on a Roll

Junk bonds are poised to extend their lead over U.S. equities into a fifth year as debt investors bet that the American economy will keep expanding even if profit growth slows. Bonds rated below investment grade have beaten the Standard & Poor’s 500-stock index by 53 percentage points since October 2007, returning 34 percent through Nov. 25, while stocks fell 19 percent, according to data compiled by Barclays and Bloomberg.

The contrast is even more striking in the case of several well-known companies. Ford Motor’s 7.125 percent notes due in 2025 have risen 129 percent since Oct. 9, 2007, well ahead of the 17 percent gain by shares of the second-biggest U.S. automaker, according to data compiled by Bloomberg. Moody’s Investors Service and S&P raised Ford to the highest noninvestment grade in October. Sprint Nextel’s 6 percent notes due in 2016 have returned about 10 percent since Oct. 9, 2007, vs. an 87 percent drop for shares of the third-largest U.S. wireless carrier. J.C. Penney shares have lost 51 percent since Oct. 9, 2007, while its 7.95 percent securities due in April 2017 have returned 35 percent.