In One Chart: Yield gap between risky corporate debt and investment grade sinks to 12-year low

The hunt for yield is making parts of the U.S. corporate bond market look a lot like 2007.

The highest-yielding corporate debt, also referred to sometimes as “junk”— due to the borrower’s greater chance of default — typically rewards investors comparatively more than higher-rated, investment-grade bonds.

However, investors are finding that the reward for owning junk compared against comparable investment-grade debt is compressed as investors, retreat from the roughly $13 trillion in debt that pays debtholders less than zero, in search of something more richly rewarding.

That means that investors are increasingly taking on more apparent risk to find greater coupon payments.

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