In the July 21 issue of Forbes Magazine, Marilyn Cohen discusses Junk Bonds in “Trouble in Junk Land”
27 US corporations defaulted on their publicly traded debt so far this year compared to 22 defaults for all of 2007. Many companies are struggling to make payments and some are even making payments by issuing more bonds.
Ms. Cohen thinks default rates will rise and this will put pressure on long-term junk bonds and junk bond funds. She encourages investors to sell junk bond funds if they own them. She specifically cites SPDR Lehman High Yield Bond (JNK), iShares iBoxx High Yield Corporate Bond (HYG) and PowerShares High Yield Corporate Bond (PHB) as funds to sell.