NU Online News Service, July 18, 12:15 p.m. – American Express Company, New York, says its American Express Financial Advisors unit is cutting back sharply on investments in low-rated "junk bonds" to cope with the weak economy.
"During the second quarter, default rates rose to historically high levels," American Express says in a statement announcing the changes.
The company has decided that the benefit of owning junk bonds is "not sufficient to compensate for the underlying risk during difficult market cycles."
AEFA will limit junk bonds to 7% of its investment portfolio, down from 12% in 1998, and it will also restructure the rest of its portfolio to reduce its vulnerability to the failure of one company, or problems in one industry, the company says.
