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Monday, February 28th, 2011
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The reach for yield has sparked an amazing rebound in the market for low-grade (or high-yield or junk — take your pick) debt.  Using the Finra-Bloomberg Index, you can see that yields are now close to the pre-crisis lows, although the spread is still wider due to the low rates available on Treasuries.

With many market observers warning of inflation and others seeing deflation around the bend, investors in junk are betting on “just right,” extrapolating the improving economy and recent low rate of defaults.  The low-grade market will be a good place to watch for signs that the status quo is changing.  (Chart:  Bloomberg terminal.)