06/07/2009 05:12 am ET Updated May 25, 2011

Junk-Bond Rally Premature as Record Defaults Loom, Analysts Say

May 7 (Bloomberg) -- Junk-bond investors who have spurred the biggest rally on record are getting ahead of the recovery as the rate of company failures is about to surge, according to debt strategists from at least six Wall Street firms.

Bonds rated CCC and lower -- those ranked most likely to default by Standard & Poor's, Moody's Investors Service and Fitch ratings --have gained 39 percent since March 9, compared with 14 percent for those rated BB, or just below investment- grade, according to Merrill Lynch & Co. index data. The bonds helped spur the biggest junk rally since Michael Milken helped create a market for the securities in the 1980s.