Originally Posted by perinova
Thanks. I was going to ask the same question as pb4uski .
What is the easy way to look at the spread you are talking about? Is it purely the yield difference between Treasuries and Junk Index (I actually didn't know about this index).
Brewer - I also have some bond funds with a mix of high grade and there is a kick of high yield there. Are you thinking it would be better to move this into a purely high grade fund for now? These are Fidelity funds: Total Bond vs Bond Index, I actually have a mix of both.
The lazy way I monitor spreads since I no longer have access to a Bloomberg terminal is a daily (or so) visit to this site: BofA Merrill Lynch US High Yield Master II Option-Adjusted Spread (BAMLH0A0HYM2) - FRED - St. Louis Fed
I have a couple of small positions in closed end funds that have a smidge of junk. If its a truly tiny amount and you have a reason for holding the fund (I expect discounts to tighten on my CEFs), I would say it is no biggie. If this is just a bond fund, I would insist on no junk.
Floating rate fund hold leveraged loans, which is junk by another name. They have little or no interest rate risk, but they have lots of (junk) credit risk. Basically they are loan to the same shaky companies that issue junk bonds, but if the company goes bust the loans are ahead of the bonds in order of who gets paid. In theory this means that loan holders should be less at risk than bond holders. In practice, these loans did not do so well in the crash, so don't be mislead that they are safe money.