BB - BBB spread offers opportunities

In a world where everything seems expensive the BB bond still seems Attractive in comparison to BBB rates corporate debt. The BB continues to offer a nice spread 143 BP spread over its BBB relative.

Now with that in mind one must remember recently for the first time ever HY (high yield) corporate debt now yields below the rate of inflation, however with the FED backstopping the risk associated with HY by buying up junk bonds it definitely deserves a look.

The BB offers a possible opportunity similar to short term yield, but the risk would be classified as closer to investment-grade. As BB is obviously the highest level of HY debt out there.

The leverage ratios of BBs are closely related to BBBs. Default rates for BBs also have only been about 50BP higher than that of BBBs.

BBs also have a low risk premium in comparison to the rest of the HY corporate debt sector. It is definitely something to look into further.