Junk bond spreads decline steeply
As shown by the Merrill Lynch US High Yield Index, junk bond yields have declined considerably since the peak of October 2011. The decline of 211 basis points means the spread between high-yield debt and comparable US Treasuries has narrowed by 23%. With the U.S. 10-year Treasury Note yield at 1.97%, high-yield borrowers have to pay 8.96% per year to borrow money for a 10-year period. This is certainly a huge improvement from the levels in excess of 20% at the peak of the credit crisis in 2008.
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