The effect of volatility

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Last year, high-yield returns outperformed all but the most optimistic of projections, leaving many market professionals wondering what’s in store for 2004. Given the close relationship between the volatility of the equity market and the pricing of fixed-income risk in the high-yield arena, indications are that spreads may not have any more room to tighten this year, says Richard Gordon, managing director and fixed-income strategist at Wachovia Securities.

In the chart below, which was provi

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