As energy prices fall below $28 a barrel, investors are understandably nervous about their oil- and gas-related stocks. However, people should be paying closer attention to another part of the energy market:corporate bonds.
According to Morningstar, 75 percent of all fixed-income funds have some energy exposure. The amount allocated to energy depends on the fund, of course, with the Columbia Limited Duration Credit (ALDAX) fund having the most exposure, with 28.7 percent, and the Prudential Government Income fund (PGVAX) with the least, at 0.5 percent.
When oil was at $120 a barrel, managers were happy to hold energy bonds — they were seemingly safe and paid attractive yields. Now many energy companies have been downgraded and bonds have defaulted.
In 2015, 29 energy companies defaulted to account for 26 percent of all corporate defaults. The credit-rating agency expects about 6 percent of all U.S. energy corporates to default in 2016 .... http://www.cnbc.com
