Investors in U.S. junk bonds are wagering they’ll be fully repaid for the first time since before the credit market seizure, dismissing concern the economy will go back into recession and trigger a rise in corporate defaults.
Average prices on high-yield debt rose above 100 cents on the dollar today for the first time since June 2007 after falling as low as 55 cents in December 2008, Bank of America Merrill Lynch index data show. Bonds due in 2031 from Ford Motor Co., which fell 22 months ago to 12 cents on concern that the automaker would fail, trade above par for the first time in more than five years.
Evidence the economy will continue to grow is driving demand for the riskiest debt, giving investors the confidence to pour money into the weakest borrowers in return for yields that average 6.25 percentage points more than Treasuries pay. That’s helped sales of junk bonds reach $172.2 billion in 2010, exceeding the annual record set in 2009 with more than three months left in the year, data compiled by Bloomberg show.
http://www.bloomberg.com/news/2010-09-17/junk-bonds-reach-par-for-first-time-since-07-on-upgrades-credit-markets.html
