Investment grades the safer bet in market not ripe for undue heroics

Corporate bonds are an enticing investment opportunity but risks abound. According to Moody's rating...

Corporate bonds are an enticing investment opportunity but risks abound. According to Moody's rating service, in the year to March 2009, almost 7.5% of low-rated companies failed, up from a 2% default rate a year earlier. Furthermore, indicators suggest the high-yield default rate could double by December 2009. The current yield premium of about 14% offered by high-yield debt is superficially attractive, but is barely sufficient to cover losses of this magnitude. By contrast, in the short term, investment-grade bonds appear better placed to deliver decent returns. At current yields, the...