Junk bond rally strongly

Bloomberg is reporting that junk bonds had their best monthly showing since at least April 1987:

High-yield corporate bonds rallied the most since Michael Milken helped create a market for the securities in the 1980s.

Junk bonds returned 11 percent in April, the best performance since at least 1987, according to Merrill Lynch & Co.’s U.S. High Yield Master II index. The debt outperformed the Standard & Poor’s 500, U.S. Treasuries and investment-grade bonds.

The impressive thing is that junk bonds beat the S&P 500 last month. The strong performance of junk bonds, especially in the face of rising defaults and declining default recoveries, is quite bullish for the stock market.

The dangerous thing for any investor right now is the fact that the correlation between all assets is getting close to one again. Almost everything has been rallying together.


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