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Fund Spy

Is Your Fund Courting Junk-Bond Risk?

It's a good time to take stock of the credit risk in your portfolio.

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After a rough stretch that lasted from mid-2014 through early 2016, junk bonds have been on a tear. The median fund in the high-yield bond Morningstar Category gained more than 20% from March 2016 through August 2017.

That’s left the spreads on junk bonds near their postcrisis lows. Spreads represent the additional yield offered by junk bonds over comparable U.S. Treasuries for the risk that the borrowers won’t repay their debt, so tighter spreads mean less compensation for lending to the market’s highly leveraged companies.

Sarah Bush has a position in the following securities mentioned above: LSBRX. Find out about Morningstar’s editorial policies.

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