Junk Bond Recovery Predicted

February 23, 2001 (PLANSPONSOR.com) - The junk bond market may be ready to rebound, based on some measures, according to Standard & Poor's.

One key indicator is that the 2000 peak in high yield credit spreads “may indicate a prolonged junk bond fund recovery” in 2001, the company said in a study released Friday.

“Spreads between high yield bonds and Treasuries widened to a high of 873 basis points at the end of December,” said Joel Friedman, director of Standard & Poor’s Fund Services. “If behavior following similar peaks from the 1990s is any indication, high yield bond funds could have an extended bounce back in 2001.”

Friedman noted that the December-end level was the highest since the 1990-1991 recession.