Junk Bond Market Recovery For Real?

Everyone’s asking “Will the junk bond market recovery next year?” Most of the reports we have read show that high-yield credit markets default rates could fall by as much as half. This means ETF’s like the HYG could see continued marginal growth. The bad news is that 2011 could prove the start of another down cycle for junk bonds and risky loans if the economy fails to improve. And the sudden flood of credit washing over the markets may have created a new bubble!

Defaults in 2009 rose to 10.7% and while that didn’t break any new records, it was the highest in years. New preditions for 2011 and beyond are as high as 23-25%.