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In One Chart: The smart money is ready to pounce on distressed debt, but investors must beware the risk of ‘total wipeout’

The junk-bond market has been on fire. And, now, as corporate debt piles up to “precarious heights” in the face of a rising-rate environment and a hawkish Federal Reserve, Wolf Richter of the Wolf Street blog finds that Wall Street pros are licking their lips over the potential popping of the bubble.

The so-called smart money, he says, is getting ready to load up on distressed debt, which is defined as junk-rated bonds yielding at least 10 percentage points above equivalent U.S. Treasurys TMUBMUSD10Y, -0.87% .

“It’s preparing now because these preparations include raising billions of dollars for their funds, and that takes some time,” Richter wrote in a post.

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