High-yield debt is diverging from investment grade at about the most since December 2009 on signs the U.S. economy is slowing and Europe's debt crisis is worsening.
The gap between relative yields on junk bonds and investment grade reached 502 basis points yesterday and was as wide as 530 basis points on Aug. 11, the most since Dec. 1, 2009, Bank of America Merrill Lynch index data show. The difference has soared from this year's low of 301 basis points.
Investors are wagering that the riskiest companies may struggle to obtain capital as unemployment in the U.S. persists above 9 percent in all but two months since May 2009 and as France and Germany seek to contain the euro debt crisis by backing a plan for national balanced-budget amendments. Junk bonds have lost 3.77 percent this month, the biggest monthly decline since November 2008, Bank of America Merrill Lynch index data show.
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