Junk Bonds are Overpriced

I know this is r/stocks and not r/bonds, but I think this might be of interest to many of you here.

I believe junk bonds are overpriced and have not properly accounted for the added risk of a recession on top of the rising rate environment. For comparison, in late 2018, junk bond yields were at 8%, and 2 year treasuries were at 2.7%. That's a 5.3% risk premium for junk bonds (data comes from Bank of America High Yield Index).

Fast forward to today, and junk bond yields are at 8.29%, and 2 year treasuries are at 3.05%. That's a 5.24% risk premium — less than what we had at the end of 2018.

Which environment would seem to indicate more future risk for companies issuing junk bonds, today or late 2018? To me, the answer is a no-brainer. We are entering an economic period with significant risks for companies in poor financial condition, and the current premium the market is requiring from these companies seems paltry.

On top of the relative economic comparison, we also have the fact that yields are rising generally. I expect this to be a lowering tide that drops all boats.

I'm playing this with the inverse junk bond ETF SJB. It's up 14% YTD and 6.3% over the last five days. I believe the acclerated returns over the last few days are tied to the growing recognition of the economic risks in conjunction with faster-than-expected rate hikes.