Even though the writing was on the wall, US junk bonds rose so high in value to be only a few percentage points above Tbills.
Now as the interest rates are about to rise junk bonds have to compete with the rest of the bond markets and I can't see them holding up too well at all.
Junk bonds are US corporate paper and can range from AAA companies to -CCC rated, hence the difference in rates to government bonds. Ten years ago the spread was ~8% and desperation for a decent yield has pushed junk bond prices far too low. When the market reassess the risk the spread will quickly increase I believe.
For me there are two possibilities:
Proshares short Junk Bond ETF (SJB) and ishares iBoxx High yield (HYG). One's an inverse with plenty of air above and the other is a short with plenty of oxygen below.
