Stocks aren’t the only area of the market where investors seem to be throwing caution to the wind. The average yield for bonds in the BofA high yield index is under 4%. And investors can’t get enough of it.
I understand how FOMO manifests itself in the stock market. You can only watch other people make money hand over fist for so long before you jump in. Bonds, on the other hand, this one’s a head-scratcher. What’s the upside? You get your money back? And for what? A measly 4%.
Not even 12 months ago, you had people afraid to own municipal bonds.
The speed at which cycles are moving these days is really something else. It feels like we went from recession to depression to recovery to euphoria in 24 hours.
Remember in 2011 when Bill Gross was bearish on treasuries because rates were too low? The 10-year was at 3.75% back then. Now, a decade later, we have the 30-day SEC yield of HYG at 3.35%. These are extraordinary times.
Michael Batnick is a managing partner at Ritholtz Wealth Management. He is the co-host of Animal Spirits, What Are Your Thoughts, and The Compound and Friends. For disclosure information please see here.