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Two Ways: Bond Voyage!


Strengthen your portfolio in good times and bad.


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.

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.

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No positions in stocks mentioned.

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