Where's the Yield? Don't Look to Crypto Lending, at Least Not Yet

With real rates trading below zero right now, many yield-starved investors are being forced into riskier and riskier assets, including high-yield junk bonds. But even these are no longer offering a positive real return, what with inflation at multiyear highs.

According to one estimate, by Deutsche Bank’s Jim Reid, a whopping 85% of the U.S. high-yield bond market currently yields below the annual inflation rate. It’s important to note that this figure has never been above 10% in the past. Even if the consumer price index (CPI) were to fall to 3% (from 5.4% currently), that would still be above 35% of the high-yield market.

85% of the U.S. High-Yield Bond Market Currently Yields Below the Annual Infation Rate
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And it’s not just the U.S. For the first time ever, inflation-adjusted yields on European junk-rated debt have turned negative after consumer prices increased the most in over a decade in Europe.

Real Yields on European June Debt Turn Negative for the First Time Ever
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Stock prices have gained significantly so far this year, which is good, but this has had the effect of making the dividend yield look less appealing. As of last Friday, the S&P 500 dividend yield was 1.32%, the lowest point since March 2002, and well below the annual inflation rate.

S&P 500 Dividend Yield at Nearly 20-Year Low
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So, where’s the yield? Some investors had hoped to try their hand at crypto lending, but the future legality of this activity is now in the air.