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A weak global economy and a flood of money from safety-seeking investors has dragged bond borrowing costs dramatically lower over the past year and a half. Neither trend shows signs of reversing direction and long-term yields could have even further to fall before the trend to lower rates that began more than three decades ago finally hits bottom.
A weak global economy and a flood of money from safety-seeking investors has dragged bond borrowing costs dramatically lower over the past year and a half. Neither trend shows signs of reversing direction and long-term yields could have even further to fall before the trend to lower rates that began more than three decades ago finally hits bottom.
(Scott Rothstein/iStockphoto)

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‘High-yield’ bonds now pay under 6% in U.S.

TIM KILADZE

 — The Globe and Mail

Published

Last updated

Still don’t buy that the markets are severely distorted? Consider this: the payout on the U.S. high-yield index dropped below 6 per cent this week for the first time in history.

That’s right. The yield on the supposedly risky index sported a five-handle.

By now, the reason why is well known. With interest rates at rock bottom levels, investors are clamouring for yield. But the story to watch this year is whether high yield stays hot. Even if the economy doesn’t gather much steam -- keeping growth names from shooting higher -- can investors really justify piling more money into these bonds and sending the average yield even lower?