High Yield Debt

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Aug 18, 2009 10:00 am

Are you buying, selling, or holding high-yield debt (funds, individual bonds, etf's)? Some of the yields have been attractive, but I have heard some concerning commentary about some of it.

Aug 18, 2009 10:03 am

All asset classes have concerning commentary about them.

Aug 18, 2009 10:53 am

I think that ship sailed the past 6 months.  I made some money for my clients in high-yield stuff, now I am starting to back off.  However, I will still continue to hold for clients that need high current income, as there are not a lot of great alternatives right now.  For the risk profile, and the upside potential, quality dividend stocks might be a better choice right now.   

Aug 18, 2009 12:55 pm

Yeah, I agree with B24.  I was buying in Feb-April.  Holding now unless I need to increase income in portfolios, then I'll buy.

Aug 19, 2009 12:29 am

Just sold all high yield today - the past few months were a nice run; wouldn't be a buyer here form a purely probability perspective.  I.E. - it's more probable to drop than rise at least in the next 4-16 weeks.

Aug 23, 2009 2:39 am

Here's the general rule I use:

Buy high yield corporate when spreads are above 600 BP's in a recovery scenario.  Buy high yield muni's when spreads increase above 250 BP's, also in a recovery scenario.  Sell HYC when spreads narrow to 450 BP's or lower, sell HYM when spreads narrow to 200 BP's or less.  Last time I checked, HYC spreads are around 900 BP's and HYM spreads are around 400 BP's.  Both are still screaming buys until the above criteria is met.  Selling now is hugely premature.
Aug 24, 2009 8:29 pm
rankstocks:

Here's the general rule I use:

Buy high yield corporate when spreads are above 600 BP's in a recovery scenario.  Buy high yield muni's when spreads increase above 250 BP's, also in a recovery scenario.  Sell HYC when spreads narrow to 450 BP's or lower, sell HYM when spreads narrow to 200 BP's or less.  Last time I checked, HYC spreads are around 900 BP's and HYM spreads are around 400 BP's.  Both are still screaming buys until the above criteria is met.  Selling now is hugely premature.
 
Great post!
Aug 24, 2009 8:41 pm
BondGuy:
rankstocks:

Here's the general rule I use:

Buy high yield corporate when spreads are above 600 BP's in a recovery scenario.  Buy high yield muni's when spreads increase above 250 BP's, also in a recovery scenario.  Sell HYC when spreads narrow to 450 BP's or lower, sell HYM when spreads narrow to 200 BP's or less.  Last time I checked, HYC spreads are around 900 BP's and HYM spreads are around 400 BP's.  Both are still screaming buys until the above criteria is met.  Selling now is hugely premature.
 
Great post!
 
Bond guy and/or Rankstocks....are you currently taking profits on some of these longer term bonds and swapping them for the BABs which seem to have a better rate, shorter duration and better rating...i've been calling on them alot lately and it seems too easy?!?  I understand they have to pay taxes on the gain in an NQ account....but i'm going from 2036 maturity at 5.75%  A rated corporate to a 7.45% coupon @ 105 AA BAB mautring 2019.
Aug 25, 2009 9:38 am

Like ranks, i'm not a seller of high yield at this point. I am a big buyer of BABs which to me seem like a slam dunk.

 
However, just because i'm not doing it doesn't mean that you shouldn't be doing it. You can never go broke taking a profit
 
 
Aug 25, 2009 10:29 am
Hey Kool-Aid:
BondGuy:
rankstocks:

Here's the general rule I use:

Buy high yield corporate when spreads are above 600 BP's in a recovery scenario.  Buy high yield muni's when spreads increase above 250 BP's, also in a recovery scenario.  Sell HYC when spreads narrow to 450 BP's or lower, sell HYM when spreads narrow to 200 BP's or less.  Last time I checked, HYC spreads are around 900 BP's and HYM spreads are around 400 BP's.  Both are still screaming buys until the above criteria is met.  Selling now is hugely premature.
 
Great post!
 
Bond guy and/or Rankstocks....are you currently taking profits on some of these longer term bonds and swapping them for the BABs which seem to have a better rate, shorter duration and better rating...i've been calling on them alot lately and it seems too easy?!?  I understand they have to pay taxes on the gain in an NQ account....but i'm going from 2036 maturity at 5.75%  A rated corporate to a 7.45% coupon @ 105 AA BAB mautring 2019.
 
Sounds like a good thing you are doing for your clients, shortening maturities in half and increasing credit rating....
 
Aug 25, 2009 12:47 pm
noggin:
Hey Kool-Aid:
BondGuy:
rankstocks:

Here's the general rule I use:

Buy high yield corporate when spreads are above 600 BP's in a recovery scenario.  Buy high yield muni's when spreads increase above 250 BP's, also in a recovery scenario.  Sell HYC when spreads narrow to 450 BP's or lower, sell HYM when spreads narrow to 200 BP's or less.  Last time I checked, HYC spreads are around 900 BP's and HYM spreads are around 400 BP's.  Both are still screaming buys until the above criteria is met.  Selling now is hugely premature.
 
Great post!
 
Bond guy and/or Rankstocks....are you currently taking profits on some of these longer term bonds and swapping them for the BABs which seem to have a better rate, shorter duration and better rating...i've been calling on them alot lately and it seems too easy?!?  I understand they have to pay taxes on the gain in an NQ account....but i'm going from 2036 maturity at 5.75%  A rated corporate to a 7.45% coupon @ 105 AA BAB mautring 2019.
 
I think so too...and haven't had any pushback from Compliance (not that I expected any).  I'm not selling the high yield, just the bonds I bought over the past 1.5 years that have appreciated and replacing them with the BABs that have better rates, term etc..
Sounds like a good thing you are doing for your clients, shortening maturities in half and increasing credit rating....