The average junk bond fund lost 0.39% in 1998, returned a mere 4.32% 1999, and lost 9.12% in 2000. After such a long downturn, prices are relatively low so yields are high, averaging over 11%.
The only time that yields were higher and prices were lower was in 1990, when Michael Milken’s junk bond empire collapsed. Now, investors are worried by a possible recession, which might lead to high default rates.
However, the last low point for junk bonds, 1990, proved to be the time to buy: junk bond funds returned 37%-17%-19% in 1991-92-93 as the economy recovered from the 1990-91 recession. Top-rated junk bond funds, according to Morningstar, are Eaton Vance Income Fund of Boston (800-225-6295) and MainStay High-Yield Corporate Bond Fund (800-624-6782).
