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Investors Wary of Stocks Are Flocking to Junk Bonds
CNBC.com | February 06, 2012 | 02:39 PM EST

Investors may be avoiding high-yielding dividend stocks this year, but they're snapping up high-yield bonds.

Investor demand has surged for so-called junk bonds, or fixed-income securities that don't have the B-level or better ratings that Treasurys, municipals and top-flight corporates carry.

In fact, last week marked a fresh record for junk bond offerings, with $19.7 billion coming onto the market through 27 new deals, according to data from Dealogic.

That was nearly four times the average weekly issuance so far in 2012 and broke a record that had stood since May 2011.

The surge toward junk has come as investors remain wary of the resurgent stock market yet look to increase risk in their portfolios amid an uncertain time as well in global credit markets.

"High yield is at a sweet spot in the cycle here," says Robert Tipp, chief investment strategist at Prudential Fixed Income in Newark, N.J. "The market has improved and yields have begun to come down. Fundamentals are also improving."

High-yield has modestly outperformed the bond market as a whole, with a 2.7 percent return as measured through a proxy exchange-traded fund, the SPDR Barclays High Yield.

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