Are High-Yield Bonds in Trouble?

Junk bonds experienced their steepest losses since 2011 after Third Avenue Management liquidated their $789 million Focused Credit Fund. After the Great Recession, investors began pouring billions of dollars into junk bond funds to generate an income amid record low interest rates. These dynamics provided low-rated companies with easy access to capital that only expanded over time as rates remained depressed. Unfortunately, the easy access helped undeserving companies leverage up their balance sheets and may have set the stage for a collapse in the market.