Junk-Bond Funds Get Trashed
Pax World High Yield seeks to minimize the carnage by focusing on high quality.
It's been a rotten time to be in high-yield bonds, too. Junk bonds suffered their worst month on record in September, falling 8.3% as investors purged their portfolios of debt connected to firms with poor credit ratings.
The drop dragged down even those funds that hold mostly better grades of junk bonds, including Pax World High Yield (symbol PAXHX). The fund, which invests only in companies that pass certain social and environmental screens, got a lift, relative to its peers, by largely avoiding bonds rated triple C and lower.
With prices in a free fall, yields have rocketed to the heavens. The Merrill Lynch Master High Yield II index yielded 18% on October 10, or 14 percentage points more than ten-year Treasuries. "Now is a great time to be entering the market," says Mary Austin, manager of the Pax World fund.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
However, the road forward is anything but certain. Austin thinks the U.S. is already in a recession that will continue into 2009. But its length and severity, and by implication the number of companies that eventually default on their debt, depends on the effectiveness of various government efforts to unfreeze credit markets and jump-start the economy. Unlike past downturns, during which rising default rates have remained confined to a few sectors, the wave of bonds going sour this time may be spread across many sectors, says Austin. She's betting that debt from the consumer-staples, health-care and energy sectors will hold up the best. The fund yields 8%.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
How Lower Interest Rates Will Help the Housing Market
Lower interest rates will give the industry life again as they will likely create more demand and more incentives for developers and thaw a static market.
By Zain Jaffer Published
-
Six Year-End Strategies That Will Better Prepare You for Your 2024 Taxes
A little effort now can save you tons of stress in the coming months.
By Kiplinger Advisor Collective Published
-
Best Banks for High-Net-Worth Clients 2024
wealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
By Lisa Gerstner Last updated
-
Stock Market Holidays in 2024 and 2025: NYSE, NASDAQ and Wall Street Holidays
Markets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2024 and 2025.
By Kyle Woodley Last updated
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?
Markets When does the market open? While the stock market does have regular hours, trading doesn't necessarily stop when the major exchanges close.
By Michael DeSenne Last updated
-
Bogleheads Stay the Course
Bears and market volatility don’t scare these die-hard Vanguard investors.
By Kim Clark Published
-
The Current I-Bond Rate Until May Is Mildly Attractive. Here's Why.
Investing for Income The current I-bond rate is active until November 2024 and presents an attractive value, if not as attractive as in the recent past.
By David Muhlbaum Last updated
-
What Are I-Bonds? Inflation Made Them Popular. What Now?
savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. So how do they work?
By Lisa Gerstner Last updated
-
This New Sustainable ETF’s Pitch? Give Back Profits.
investing Newday’s ETF partners with UNICEF and other groups.
By Ellen Kennedy Published
-
As the Market Falls, New Retirees Need a Plan
retirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
By David Rodeck Published