Junk Bonds: Less Risk, More Return?

Monday, 18 Dec 2006 | 2:55 PM ET

Junk bonds are known for being one of the riskiest investment vehicles available. It’s then somewhat interesting to note--that $100 invested in 1987 in both the S&P 500 and the Bear Sterns Junk Bond Index would garner the same return. At the turn of the century, the S&P jumped during the dot-com boom, then crashed back to the same level as the junk bond market.

This year, the benchmark index for junk bonds – the Lehman High Yield Index – has returned 11.2%. The S&P 500? 14.2%. That’s a pretty small differential considering the reputation junk bonds have.

“Street Signs” guest Sandy Rufenacht of Aquila Three Peaks High Income Fund gave Erin Burnett a few of his junk buys: Chesapeake Energy, DirecTV, MGM Mirage and Triad.

Spotlight on Junk Bonds
The Lehman High Yield Index is up 11.23% this year, and junk bond genius Sandy Rufenacht, Aquila Three Peaks High Income Fund CEO, thinks now is a good time to dip your toe in the junk bond pond. CNBC's Erin Burnett discusses these high-yield opportunities.

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  • Brian Sullivan is co-anchor of CNBC's "Street Signs."

  • Co-anchor of CNBC's "Street Signs," Amanda Drury is based at the network's global headquarters in Englewood Cliffs, N.J.