Co. The yield to maturity on the Merrill Lynch index is now 12.744 percent. Of course, if this economy continues to weaken, defaults will rise and junk bond prices could start dropping. But the Fed's astonishingly easy money policy suggests that it wants the economy to avoid recession, and will risk inflation to accomplish that. Caywood points to the price of gold, which yesterday jumped 4 percent to a nine-month high. Deflation is what the high yield market does not like.
Welsh uses junk bond funds for certain clients.
Junk bonds will benefit. Money will move out of Treasury bonds and notes. Since 1980, junk bonds have provided a handsome 11.9 percent average annual return, says Dwyer. Junks have outperformed investment-grade bonds in 14 of the past 21 years.