Comeback of the "dash for trash" The "dash for trash" that emerged at the nadir of the financial crisis in 2009 has made a comeback this year as investors have piled into the riskiest corporate bonds they can find. Global high yield bonds, or junk bonds, have returned 5.8 per cent already this year, according to JPMorgan indices, but that pales next to the 10.7 per cent returns of bonds rated triple-C, the lowest rating rung and the junkiest of junk. European junk bonds have performed even better. The total return of JPMorgan's euro-denominated high yield index is 11.3 per cent this year, but triple-C bonds have returned over 21 per cent - just a few months after many were firmly predicting a swathe of defaults among Europe's lowest rated companies. Some asset managers and analysts argue this "dash for trash" - reminiscent of the strong rally that emerged out of the detritus of the financial crisis in 2009 - has been overdone given the vulnerability of lowly-rated companies to a global economy still grappling with the aftermath of the crisis. "With rock-bottom absolute rates and a recovery of confidence, investors are well disposed - too well disposed - towards high yield names," says Duncan Sankey, head of research at Cheyne Capital, a debt-focused hedge fund. You're not getting compensated for the vulnerability of high yield to the fundamental challenges that still abound. The strong performance of lower rated debt is partially a reflection of the scale of the market rout late last year, when lowest rated debt was the worst hit. "The increase in risk appetite this year has therefore benefited those assets the most," said Kam Tugnait, a high yield bond fund manager at Babson Capital in London. Some triple-C companies may have to restructure their debts, but others have performed relatively well despite the financial turmoil and economic downturn that followed the crisis of 2008-2009, Mr Tugnait said. The junk bond rally has been particularly strong in Europe. Credit Suisse's European high yield index yield has slumped to about 7.1 per cent this year, below the equivalent US index for the first time since July. Yet European high yield bonds are the most at risk to a reversal in investor sentiment, if poor economic growth causes corporate failures to increase. Some analysts suggest that the market has rallied at least partially because some fund managers that missed out on the credit rally early this year have had to dive into riskier bonds to make up for lost ground. That is difficult in better-rated junk bonds. Fresenius, a German dialysis company and a firm favourite of high yield investors, on Wednesday sold a €500m bond with a coupon of just 4.25 per cent. Yet global triple-C bonds still yield almost 12 per cent, according to JPMorgan's indices. The rising tide has lifted all boats. But they're triple-C for a reason," says Suki Mann, head of European credit strategy at Société Générale. The rally in high yield makes me a little uncomfortable.