Junk Bonds

Credit markets today have healed after the entire U.S. junk bond market traded at distressed debt levels suggesting a substantial risk of default. Those bond prices have since recovered and now offer investors returns of 40 percent to lead major asset classes.

Rising Stocks

The U.S. stock market too has recovered lost ground, with financial stocks leading the charge. The S&P 500 Index has rallied for most of this year. The Dow Jones industrial average <.DJI> now trades around 9,300 — up sharply from a 2009 closing low at 6,547.05, but down only about 15 percent from its close at 10,917.51 on the day of Lehman’s bankruptcy filing.

Financial Shares

Financial shares have led the charge, including gains by Goldman Sachs, Citigroup, JPMorgan Chase and Bank of America.

Safe Havens

Safe haven securities, such as gold and U.S. Treasuries, reflect the rally in other markets.

CDOs

The market for giant bonds made up of underlying subprime mortgages, consumer debt and other assets is showing signs of life but no where near peaks reached in 2007 and prior years, despite signs of rebound in other corners of the bond market. Many experts believe structured bonds backed by higher quality assets will need to recover before a full-fledged recovery can take shape.