High Yield Bonds

“I've been in high yield bonds for 48 years. And in our experience, 99% of the bonds have paid interest in principle as promised.”

“Over the last 40 years, on average, something like 3.6 or 3.7% of all high yield bonds have gone into default every year. And our default rate has been Roughly a third.”

“I think the other reason they were called drunk junk is because when Mike and Drexler became so successful in this area, other firms that really couldn't compete with them tried to kind of let people think that these bonds, there's something wrong with this, t…”

“In 1976, I think it was impossible for a company without an investment grade rating to issue a bond. And in 77, 78 is when it became possible.”

“Private credit and other private assets do not mark to market in the sense of reflecting the swings of psychology. When you go through a tough period and high yield bonds are down 10% and private credits down two percent, I think that's the explanation.”

“But on, on balance, I think high yield bonds were a good idea and a useful idea and had a very stimulatory effect. On the economy.”

“How can they insure people's lives when they know they're all gonna die? And the answer is, number one, it's risk they're aware of... Number two, it's risk you can analyze... Number three, it's risk you can diversify... Number four, it's risk they're well paid…”

“There was no such thing as a new issue high yield bond before Mike and Drexel. The only high yield bonds were fallen angels, investment grade bonds that had been downgraded.”

“The prices get absurdly low on pretty good credits, and it's also a time when the US economy was recovering from a recession in the late eighties, so you had an economy pointed up and bond prices going down, and it made no sense.”

“If you're doing high yield bonds, you sort of have a black belt in credit, and so to do loans in my brain was much easier. The wrinkle being we then took those loans and put 10 turns of leverage on it in a CLO. So the stakes of being wrong were just 10 times h…”

“Risk parity in our mind is not just holding a bunch of line items at similar risk because a simple example is credit is if you hold credit in a leveraged fashion, you could make it have a similar risk level to equities, but it actually performs very similar to…”

“If you're dealing in equities, you're dealing in high yield bonds where you can just go and buy a bond. I call it like shopping at the mall. You go to the mall, you know what you're going to buy. What we do is like going to the Turkish Bazaar and you show up w…”

“In 78, I was asked to start a high-yield bond fund, and high-yield bonds have been the, shall we say, epicenter, although it's an advised word today, for almost everything that's happened, interestingly, in finance in the last 40 years.”

“And the long-term empirical research actually finds that that stuff, the sort of Goldilocks of the bond market, does better. That it actually has the highest expected returns.”

“You know, even in the high yield ETF, a large percentage of the high yield bonds comprising that ETF don't even trade Hardly on a day-by-day basis, even though the ETF itself is very, very liquid.”