Junk Bond Extremes

Junk bond exuberance seems to be extreme:

1. The effective yield on junk bonds is now around 6%. This is an all-time low. During good times, the normal range is about 7-9%. See first chart below the break.
2. Part of this is explained by the low default rate of about 3% versus an average of 4.8%. Note, however, that the default rate a year ago was 2.3%. It's creeping up.
3. On a relative basis, these yields seem extreme. Oscar Schafer: "High yield bond yields are lower than the S&P's earning yield for the first time ever." 
4. Loomis Sayles’s Matt Eagan: "High yield bonds don’t typically trade at higher than par plus half their coupon." David Schawel: "Well, guess what? We are at that place today." Read his excellent take here.

An all-time low in yield. 

Now trading at a price above par plus half its coupon. What has happened at this level the prior three times (2004, 2005 and 2011)?

David Schawel shows the first ever negative yield spread in Junk at the end of December 2012