On the Fritz



Waiting for the Big One

Like the residents of a city built on a fault line, many high-yield bond managers are currently waiting for the Big One.

By way of background, the high-yield sector’s risk premium was chopped in half during the first 11 months of 2003. On November 30, the spread between the Merrill Lynch High Yield Master Index and 10-year Treasuries stood at 410bp, down from 820bp at the end of 2002.

Portfolio managers enjoyed the resulting 25% total return. As the market roared further

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