By now almost is everyone is familiar with the junk bond default rate. The scenario goes like this: the historic default rate of bonds rated BBB or lower is about 4%. Yet, the recent pricing of junk bonds indicates a default rate of about 21%. Further, there are some schools that suggest that some 75% of these companies are likely to default. This draconian scenario is either a huge red flag or an enormous opportunity. Something you may want to watch is JNK, the junk bond ETF. Today it traded almost 8X its average daily volume and advanced almost 4%. With a yield of about 16% it bears watching.
