In an article symbolic of the media’s attempts to keep finding the dark side of any news, an article heralding the fall of junk bonds below the symbolically important 8% rate gets the ominous title: “Is Debt Thaw on Borrowed Time?”. Read the article, though and you find:
Meanwhile, the additional interest that most junk bonds pay over Treasury bonds has fallen by nearly two percentage points since mid-March to around 6.8 percentage points, according to Merrill Lynch data.
And a handful of firms, including power company AES Corp. this week, recently issued junk bonds with interest rates below the key threshold of 8%, the first time that happened in many months.
There are some encouraging signs regarding the leveraged-buyout overhang. The pipeline of unsold leveraged loans and bonds has shrunk to roughly $100 billion from more than $300 billion last summer, alleviating some strains on the market.