Junk bond yields hit another low Junk bond yields hit a fresh historic low as investors scrambled for higher returning assets ahead of a US Federal Reserve decision that could promise ultra-low interest rates for years to come. An index of high-yield corporate debt showed a yield of 6.48 per cent, down from 8.35 per cent at the start of this year. The inflows into junk bond funds that have been driving the buying spree look likely to set an annual record. Ed Marrinan, strategist at RBS Securities, said investors were expressing confidence that the Fed will ease monetary policy and that the German constitutional court will approve the European Stability Mechanism, the region's permanent bailout fund. "Without having a crystal ball, there is a growing confidence that both events will come out relatively supportive of the markets," he said. As long as the court ruling is not unfavourable, the risk assets party can play on. The Fed is expected to announce a new programme of bond buying, or quantitative easing, at the end of a two-day meeting of its Federal Open Market Committee on Thursday, or other policy measures to hold down rates and stimulate the economy. That has increased demand for both new issues of corporate high-yield bonds and bonds already trading in the secondary market. The 6.48 per cent yield on the Barclays US Corporate High-Yield index is the lowest since the bank began calculating the figures in 1983. Inflows into mutual funds and exchange traded funds specialising in high-yield bonds have already hit $31.4bn so far this year, according to data from Lipper. This is close to the full-year record of $31.9bn set when the Federal Reserve ran its first programme of quantitative easing in 2009. Jeff Tjornehoj, analyst at Lipper, said he sees "nothing standing in the way of eclipsing that record. With the Fed buying up bonds, there is a dearth of interest in other assets. Safety just doesn't pay and, as a consequence investors have to take on more risk. DR Horton, the housebuilder, became the latest company to take advantage of the surge in investor demand for high-yield bonds, offering $350m in 10-year senior notes on Tuesday. Francis Rodilosso, a portfolio manager at Van Eck Associates, said the asset class remains one of the most attractive, despite falling yields and tighter spreads. Investors are willing to keep moving into [lower] credit assets because for now we are not seeing a pick-up in default rates and while the economy is far from great, it is muddling through. "We are not sliding back into recession, which would be a serious cause of concern and a potential negative for the [high-yield] market," he added.