{"id":23928,"date":"2023-06-17T10:09:29","date_gmt":"2023-06-17T14:09:29","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/magnificent-seven-meet-the-junk-bond-five\/"},"modified":"2023-06-17T10:09:30","modified_gmt":"2023-06-17T14:09:30","slug":"magnificent-seven-meet-the-junk-bond-five","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=23928","title":{"rendered":"\u201cMagnificent Seven\u201d meet the \u201cJunk Bond Five\u201d"},"content":{"rendered":"
\n

\u201cMagnificent Seven,\u201d meet the \u201cJunk Bond Five.\u201d<\/p>\n

The stock market isn\u2019t the only place where a handful of companies are driving powerful gains. It\u2019s happening too in distressed high-yield, or \u201cjunk bonds.\u201d <\/p>\n

Debt issued by Altice USA Inc.
\n ATUS,
\n -2.30%<\/bg-quote>,<\/span>
\n Carvana Co.
\n CVNA,
\n -4.02%<\/bg-quote>,<\/span>
\n Community Health Systems Inc.,
\n CYH,
\n +3.43%<\/bg-quote>
\n Lumen Technologies Inc.
\n LUMN,
\n <\/bg-quote>
\n and Rackspace Technology
\n RXT,
\n <\/bg-quote>
\n have been punching up the overall performance of distressed corporate debt.<\/p>\n

\n

Gains in their bonds accounted for about two-thirds of the rally seen in the past week within the CCC-rated category of distressed debt, according to BofA Global.<\/p>\n

Drilling down, BondCliQ charted performance for the five junk-bond issuers over the past 10 days, with Community Health System\u2019s bonds seeing the bulk of the trading action.<\/p>\n

<\/p>\n
<\/p>\n<\/figure><\/div>\n

\u201cThe picture of super-concentrated returns is the same if the time horizon is extended to the last 2wks and 3wks,\u201d Oleg Melentyev\u2019s team at BofA wrote, in a Friday client note.<\/p>\n

The ICE BofA US High Yield Index spread was last pegged at 4.21%, down from a 5.2% peak for the year in March, as fears of a spiraling regional banking crisis were running high. <\/p>\n

Bond are priced over a spread above the risk-free Treasury
\n TMUBMUSD10Y,
\n 3.769%<\/bg-quote>
\n rate to help compensate investors for default risks. <\/p>\n

Aggressive Federal Reserve interest rate hikes since last year have been met with climbing corporate defaults in 2023, mostly by riskier companies that binged on cheap and abundant floating-rate debt during the pandemic.<\/p>\n

See:<\/strong> Leveraged loan defaults hit $25 billion, head for third worst year in history, says Goldman<\/p>\n

DoubleLine\u2019s Jeffrey Gundlach recently warned of signs of \u201cmania\u201d in the stock market as seven big technology stocks help drive the S&P 500 index
\n SPX,
\n -0.37%<\/bg-quote>
\n to its near 15% gains in 2023.<\/p>\n

Gundlach also said the Fed should stop raising rates, even though it has two more increases penciled in that would bring benchmark borrowing cost to a range of 5.5%-5.75%, or risk triggering a painful recession.<\/p>\n

Back in junk-bonds, investors appeared less concerned in the past week about the distressed segment of the market. <\/p>\n

\u201cWithin CCCs, 70% of all gains were driven by the distressed segment,\u201d Melentyev\u2019s team wrote.\u201d <\/p>\n

Carvana shares were up 434% on the year to $25.32 on Friday, while those of Altice, Community Health Systems, Lumen and Rackspace Tech were trading below $5 a share, according to FactSet data.<\/p>\n

Read next:<\/strong> How U.S. financial markets have performed in the past 15 months as Fed rate hikes fueled wild swings<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

\u201cMagnificent Seven,\u201d meet the \u201cJunk Bond Five.\u201d The stock market isn\u2019t the only place where a handful of companies are driving powerful gains. It\u2019s happening too in distressed high-yield, or \u201cjunk bonds.\u201d Debt issued by Altice USA Inc. ATUS, -2.30%, Carvana Co. CVNA, -4.02%, Community Health Systems Inc., CYH, +3.43% Lumen Technologies Inc. LUMN, and […]<\/p>\n","protected":false},"author":1,"featured_media":23929,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-23928","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\n\u201cMagnificent Seven\u201d meet the \u201cJunk Bond Five\u201d | iFintechWorld<\/title>\n<meta name=\"description\" content=\"\u201cMagnificent Seven,\u201d meet the \u201cJunk Bond Five.\u201d The stock market isn\u2019t the only place where a handful of companies are driving powerful gains. 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