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A bond portfolio.

A stronger economy is theoretically good for highly indebted companies because it helps them pay their debt.

That's what high yield bond bulls will tell you when they argue that junk bonds should be a haven in a rising rate environment. A better economy means less credit risk and that should buoy bonds issued by companies with weak balance sheets.

The fact is, however, in a month like June, that argument doesn't wash. High yield bonds in Canada's market are taking it on the chin in the bond market's rout.

The tally for June is out, courtesy of Bank of Montreal's BMO Nesbitt Burns unit, and it's not pretty. All but three of the roughly five dozen bond issues tracked by BMO fell in price in the month, and many of the drops were pretty sharp.

Conceptually, the argument that a strong economy is good for high yield bonds is attractive. The reality of June however is people are fleeing bonds of all types. The best high yield owners can hope for is to outperform.

Looking down the BMO bond run, there are a lot of bonds that fell a full dollar or more in the month, a pretty steep decline, and the drop took in all industries.

Are Canadians going to eat out more if the global economy is better? Perhaps, but bonds of restaurant owner Cara Operations Limited debt fell $2 to $102. Are they going to gamble more? Maybe, but Gateway Casinos & Entertainment Ltd. debt fell $1.75 to $106.30.

The list goes on. But the upshot is that, for the moment, the credit risk argument is not one the market at large wants to hear.