Credit conditions have been steadily improving for companies, particularly those considered higher risk. This is good news for investors in so-called junk bonds, says Kleintop, who calls the so-called high-yield bonds his 鈥渇avorite asset class.鈥�
There are risks associated with the companies, agrees Kleintop. 鈥淭here is the risk they will burn through their cash or use it for acquisitions and not make debt payments,鈥� he says. 鈥淏ut you have to expect their credit quality will improve in 2011.鈥�
Kleintop anticipates a third good year for the bonds in large part because they offer investors yields of 7 percent to 8 percent 鈥� a significant premium above investment-grade bonds, cushioning any losses if interest rates go up.
