Credit on Course to Pricing Junk as Junk After Rude Awakening
- Average junk-bond yield reaches highest since November 2020
- However, the global gauge is still below its 10-year average
This article is for subscribers only.
The blowout in spreads across the credit world is ushering the return to an old normal: a market where junk bonds are priced according to their credit risk, not the level of central bank support nor investors’ demand for yield.
The average yield on junk bonds globally has risen every week this year to 5.8% as of Thursday, according to a Bloomberg index. While it’s the highest level since November 2020, it’s still below its 10-year average (as measured through to the end of 2019 -- leaving the price action in 2020 out of this, because it skews everything for almost every asset class).