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Investors are selling out of the riskiest US junk bonds in favour of higher-quality debt, amid a surge in bankruptcy filings and concerns over how the weakest corners of corporate America will survive a prolonged period of high interest rates.
The gap in borrowing costs between companies rated triple-C and lower — the lowest rungs of the $1.3tn US junk bond market — and double-B — the highest rung — has surged to almost its widest level since May last year, according to Ice BofA data, as investors seek safer names.
The move highlights how traders are growing increasingly concerned about weaker companies potentially losing access to funding and defaulting on their debt as borrowing costs stay high, and are instead opting to buy the debt of stronger companies for the yields on offer.
The sell-off in riskier…
