signs of slowing growth haven’t done much to damp investors’ appetite for junk bonds steady demand has pushed down junkbond yields which fall when bond prices rise by a percentage point since bank distress rattled markets last month the premiums that investors demand to hold junkrated debt rather than rocksolid treasurys have shrunk too a sign of diminished worry about belowinvestmentgrade companies defaulting on payments those premiums or spreads have mostly hovered between 44 percentage points and 46 percentage points in the second half of april down from a peak of 52 points amid the bank tumult in march that is well below the levels—often above 8 percentage points or more—that junkbond spreads have hit during recessions “there’s absolutely no evidence of a recession riskpremium” in the junkbond market said lotfi karoui chief credit strategist at goldman sachs adding that prices of the debt are often slow to reflect approaching recessions junkbond investors are hoping that the federal reserve can cool inflation without tipping the economy into a more serious downward spiral that sparks a wave of bankruptcies and defaults their view contrasts with trading in other parts of the bond market where some worry that last month’s stress in the banking system will slow lending and growth hurting weaker businesses futures markets show that traders are betting the central bank will start cutting interest rates as soon as autumn a sign they think officials may need to shift gears to cushion a flagging economy spreads have moved higher on bonds backed by commercial real estate and by lowquality car loans—betraying a level of caution about those sectors that hasn’t yet touched junk bonds adam abbas cohead of fixed income at chicagobased harris associates said the fixedincome fund he oversees has shifted away from junk bonds with his team doubtful that current spreads are high enough to reward investors for taking on the additional risk “the highyield market is probably looking a little too optimistic right now” he said some newly issued junk bonds have underperformed this month bonds from steelmaker clevelandcliffs inc have fallen in price since they were issued april 14 to trade at 96 cents on the dollar according to marketaxess data but others such as bonds sold earlier this week by constructionmaterials firm knife river corp have traded above their par value so far stress in the market remains low in the first quarter 20 us corporate defaults pushed the overall default rate to 27 over the last 12 months according to a moody’s analysis that is up from 2 in december 2022 but well below highsingledigit levels junkrated bond funds recorded inflows for three straight weeks through april 19 including nearly 3 billion in the latest week according to leveraged commentary and data new bonds from companies raising cash are selling easily with demand far outstripping supply in some recent auctions bond managers say under the surface some signs of eroding confidence are emerging the lowestquality bonds—those with credit ratings of triplec and below—have lagged far behind those from betterrated companies these bonds are trading at spreads of more than 11 percentage points relative to treasurys up from less than 7 percentage points at the start of last year according to index data from intercontinental exchange over that same stretch spreads for higherrated doublebs have risen by less than a percentage point as early batches of firstquarter earnings roll in spreads have also climbed for some companies that have posted lessthanstellar performances the spread on doublebrated bonds due in 2029 from seagate technology holdings plc has risen by more than half a percentage point this month after the datastorage company last week posted a gloomy sales and profit outlook for the current quarter seagate said demand from large customers has been weaker than expected and that it is embarking on a restructuring plan that will cut costs other companies’ solid numbers have reinforced bullish takes on the market when it posted earnings in march junkrated home builder kb home surpassed sales and profit expectations and said that demand from buyers is picking up again spreads on its bonds due in 2031 have fallen by more than a percentage point since midmarch standalone junkbond yields—at around 846 this week—are trading near decadeplus highs an enticement for investors primarily interested in buying and holding lowquality bonds for the longer term some investors also say they are drawn to the market right now because many outstanding junk bonds—issued during the lowinterestrate years that preceded 2022—are now trading at a significant discount to their face value stephen repoff a bostonbased portfolio manager at gwk investment management said that recent corporate results have underscored his cautious but constructive view of the junkbond market “the theme so far seems to be beating relatively low expectations” mr repoff said “more importantly we’re not really seeing any of the volatility that would be sending troubling signs”