On high yield and high risk investing in EM and junk debt

Right now, everyone is talking about an emerging markets crisis due to the simultaneous turmoil in several emerging markets. I am not concerned about this being a full-blown crisis yet. At the same time, I do want to use this as a launchpad for a discussion about high yield and high risk investments, whether they be leveraged loans and junk bonds in the US, sovereign debt in Greece or investments in emerging markets. Some of these are investments doing well, others are not. And this points to the ‘crisis’ as not being merely about risk-off.

If you look back to one year ago - pre-tapering - what you see in terms of US fixed income is a picture of incredibly low sovereign yields and low but not extremely low corporate risk spreads. Emerging markets were doing well. The 10-year Treasury wa...


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