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It has been fascinating to watch the spreads on both investment-grade and below-investment grade ("junk") corporate bonds over the past trimestre. Even some of the Canadian chartered bank bonds were trading, at least temporarily, at near 500 basis point spreads.

Some of the junk grade stuff--which I have been streadily buying--has been paying 10% to 14% net yields (calculated without reinvesting the coupons).

This is the first time, I have ever paid that much attention to bond yields during an economic turn-down as personal investment instruments as opposed to using yield curves as a growth oracle. Do bond yields typically behave this way in an economic downturn?


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