Municipal Bonds Stay Strong While Junk Bonds Feel Strain

While municipal bonds have performed well over the past year, despite national deficits and overseas debt crises, the world of high yield corporate bonds, or "junk bonds," have experienced a more shaky progression. Investors have turned to junk bonds with every signal that the economy could rebound, but the overall issuance of corporate bonds is down this month by 3.78 percent, as the atmosphere of uncertainty comes creeping in again. While investors are known to desire fatty yields, an experienced bond manager knows to keep portfolios diverse and look up a prospective bond online.

What Is a Junk Bond?

Both the investor and the bond manager have historically turned to the bond market for security. Municipal bonds, particularly essential service revenue bonds with high transparency, are a highly recommended safe bid in virtually any sort of economy. On the other hand, a corporate bond that is below investment grade rating is perceived to carry a significantly heightened risk and is therefore deemed a junk bond. Despite bearing a rather unflattering title, there are incentives to consider these investments, namely in the way of collecting higher interest. Naturally, when the climate surrounding the municipal bonds market is healthy, investors will have the confidence to gravitate toward risky investments to satisfy their hunger for high yields, and with smart bond manager strategies, it can sometimes be a worthwhile play.

Junk Bonds Hit Hard Due to Prevailing Uncertainties

The looming presence of overseas debt woes continues to hurt junk bonds and bond values. In terms of liquidity, high yield, high risk investments may very well experience their worst month in nearly ten years. An environment of uncertainty is never healthy for junk bonds, and it certainly hasn’t helped that there are far fewer bond issuers around today to diffuse the risk -- thanks to the credit crisis. The fact that interest rates are rising does nothing to help matters either, though there are some who are optimistic about B and BB grade junk bonds, feeling that these could actually perk up with the improving economy. Naturally, seasoned investors and bond managers know not to put too much stock into ratings in lieu of personal research. After all, even the so-called AAA municipal bonds have defaulted in the past.

Online Bond Manager

It makes sense to arm yourself with the best bond analysis tools that a high net worth bond manager would be privy to, in order to read and measure municipal bonds. By effectively becoming your own bond manager, you can make the smartest, safest bids and know when to seize the safest municipal bonds while avoiding the riskiest of speculative grade junk.