This video segment was done on May 13, about a week before Ben Bernanke’s May 22 comments sparked a sudden and violent sell off in all asset markets but particularly acute in income oriented sectors like high yield bonds and dividend paying stocks. In the past three weeks much of this initial decline has rebounded, prompting some to fall back into the slumber of complacency with present price risks. But just because one may chose to close their eyes once more, does not mean that outsized risks to capital have gone away. Warning shots have been fired, those who decide not to hear them and continue dashing for trash are likely to get their just desserts over the fullness of this extreme market cycle. Just as they did in 2001-03 and 2007-09.
Wall Street traders are calling them ‘the bonds formerly known as high-yield’. FT markets reporter Stephen Foley goes behind the rally in junk bonds and asks why fixed-income investors are taking on more risk for less reward.
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