Safest Part of Junk-Bond Market Seen Overpriced as Cash Pours In
- Spread difference between BB and BBB nears a 10-year low
- Going short BB, long BBB may be the trade as economy slows
This article is for subscribers only.
U.S. corporate debt rated BB, the safest part of the junk-bond market, is now looking overpriced by at least one measure as investors pour money into higher yielding debt.
"Given the strong performance of BBs to start the year and the low yield they offer, and given that BBBs are relatively wide versus A rated, we believe the BBB-BB spread is too tight and prefer BBBs," said Randall Parrish, Voya Investment Management’s senior high-yield portfolio manager.