The Junk Bond Orgy

Jump right in, take off your clothes and go hump a junk bond fund like everyone else.  If it feels good, do it!

This is one of the unintended consequences of the Fed’s Zero Percent Rates Forever doctrine – we are literally forced up the risk ladder.  The last time this went on was 2002-2003 when pension fund managers were prodded out on the risk curve and out on the yield curve by Greenspan.  So they bought mortgage bonds in trillion dollar increments, fortunately they were all AAA-rated so it didn’t turn into a debacle or anything.  Oh wait.

Anyway, the junk bond fund orgy is spilling out of the bedroom into the foyer, so much so that the doors are now being shut…

From ETF Trends:

The seemingly insatiable demand for high-yield corporate debt has forced Vanguard to close a junk bond mutual fund after investors pumped $2 billion into the fund the past six months.

The firm is closing the $16.9 billion High-Yield Corporate Fund to most new accounts “in an effort to curtain strong cash inflows,” according to a press release Thursday…

In the first quarter, Fitch estimates total retail fund flows into high-yield bonds reached $15 billion, with at least 20% of the total resulting from new flows into junk bond ETFs/

Don’t worry, I know a guy, I can probably get you in.

Source:

Vanguard Closes High Yield Fund – ETF Alternatives (ETF Trends)