Barron's: Hidden Gem Bond Plays

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From Barron's 8-6-07:

"Yes, junk bonds can be volatile. Yield margins in general narrowed by about 0.30 of a percentage point last week after getting as wide as 4.60 percentage points the week before. And the contagion produced by the housing slump likely will continue to spread and produce more damage.

Still, credit-quality has some strong support right now. Growth in gross domestic product in the second quarter was a healthy 3.4%, corporate earnings growth was OK, and default rates -- the bane of the junk-bond market -- are expected to inch up to just 3.5% a year from their near-historic lows.

Individual investors may face somewhat less competition than usual from the big players. Typically, Wall Street and hedge funds would be the first to jump in to snap up junk bonds if they spotted a screaming buy. But the Street is on the hook for big bridge loans to LBO sponsors, now that high-yield investors have balked at buying bonds from debt-laden companies."

So here are some bond plays for the individual investor.

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