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Junk-Debt Wrecking Ball Swings Toward Telecom

Buried in last week’s debt sell-off was an important message to credit investors: Not all bonds are the same, and those of telecommunications companies appear worse off than others.

While U.S. high-yield bonds lost 0.8 percent last week, debt of companies such as Frontier, CenturyLink and Intelsat were hit even harder. Speculative-grade bonds of telecom companies lost 1.3 percent on average, more than those in any other industry.

The pronounced industry weakness was due in part to some company-specific issues, such as some disappointing second-quarter earnings and merger speculation. But the disproportionate declines highlight broader investor concern about an increasingly challenging backdrop for these companies.

Windstream Holdings, for example, halted its dividend last week while also announcing plans for a share buyback. Its $700 million of bonds maturing in 2020 plunged nearly...