Two Ways: Bond Voyage!-Minyanville

Two Ways: Bond Voyage!

Terry Woo Apr 06, 2009 5:30 pm


		Strengthen your portfolio in good times and bad.

more 2 Ways 2 PLAY »

High-yield bonds could default at a rate of 53% over the next 5 years. According to Bloomberg, Jim Reid, the head of fundamental credit strategy at Deutsche Bank, wrote in a note to clients that the default rate would likely surpass the 31% 5-year level seen in the early part of this decade and the 45% rate seen during the Great Depression.

Reid’s estimate is based on the premium investors are demanding to hold the securities. He assumes recoveries from the defaults will be zero.

Further, Reid believes US property values -- the collapse of which was a chief catalyst to the worldwide financial crisis -- have another 16% to fall, with UK numbers nearly double that amount.

STOCKS
RELATED ARTICLES
ALSO BY...

See Professor Tom Fant’s column, No Bad Bonds, Only Bad Prices.

From the Bull Pen: Those bullish the overall markets should continue to keep the BlackRock Corporate High Yield Fund ETF (HYT) on the radar. It could be a good time to sell some longs should this fund start to roll over.

From the Bear Cave: Bears can consider the iShares US Real Estate ETF (IYR). With resistance near $30, one can test the downside with a buy stop above that level.

Done with Monday. And remember: It’s a short week with Friday off. Have a great night!

In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.

4 of 4 (100%) found this helpful
Rate this article:			(4 Votes)

more 2 Ways 2 PLAY articles »

Daily Article Index �

tags:

DEFAULTS

Comment (1)

See All Comments »

Ted Gutelius

View Exchanges


04-06-2009, 6:04 pm
Just reset all mortgages that are current to the current rate. Lenders' have higher quality paper. Borrowers' have a better ability to pay. Read More


discuss this article and more on the mv exchange

No positions in stocks mentioned.

Get real-time options trading ideas from Steve Smith, veteran options trader and newsletter author, plus let him show you the way to cut risk and boost your returns through the strategic use of options. Click here for a free 14 day trial to OptionSmith by Steve Smith.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2009 Minyanville Media, Inc. All Rights Reserved.