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Portfolio > Economy & Markets > Stocks

High-Yield Bonds Signal More Market Gains: Searching for Alpha for November 2015

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Stocks surged last month. But the market fireworks weren’t restricted to equities.  

After a tough summer that saw junk bond yields hit 8% – a three-year high – corporate bonds are also staging a recovery. Issuance is on a comeback, with U.S. corporate bond sales over $100 billion last month (that figure includes all corporate bonds, not just high yield). This return of the risk appetite for fixed income investors may indicate that the economy is in better shape than many believe. 

We’ve seen high yields lead stocks on the way up before. In 2009, for instance, junk bonds gave a buy signal months before stocks finally bottomed.  And with money flowing into high yield debt at the fastest pace since February, the recent uptrend in the asset class may well mean that the market isn’t finished heading higher.

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