When Josh Birnbaum was at Goldman Sachs in 2007, he made a huge bet against subprime mortgages. 

Now he's betting against something else: high-yield bonds.

From The Wall Street Journal:

Joshua Birnbaum, the ex-Goldman Sachs Group Inc. trader who made bets against subprime mortgages during the financial crisis, now has more than $2 billion in wagers against high-yield bonds at his Tilden Park Capital Management LP hedge-fund firm, according to investor documents.

On Monday, The Journal published a big report on the worries facing investors in the junk bond space amid the sharp decline in the price of oil. Bonds tied to the energy sector make up about 15% of the high-yield space. 

A few weeks ago, investment adviser Josh Brown wrote: "The question now is whether or not the slide in crude can do enough damage in the high yield market to set off a chain reaction of de-risking, default, and outflows."

As The Journal reports, junk bonds this year have returned less than 1% after gains of about 7% last year and 15% in 2012. 

On Friday, the effective yield for high-yield bonds closed at multiyear highs, topping 7% and also topping the yield seen during the "taper tantrum" in spring 2013.

A rise in bond yields implies that investors are worried about the ability of borrowers to repay their obligations. In the event of a default, those who hold junk bonds are often the first to take a "haircut" (in which they do not get the full value of their investment back).

The rise in the yield for junk bonds also comes amid a rally, or decline, in the yield on Treasury bonds, as investors seek safety amid unsettled markets. 

Here's the crazy spike in high yield. 

See Also:

The Real Reasons Trader Joe's Wine Is So CheapWhat The US Could Do In Response To The Sony HackThe Ex-Goldman Trader Who Correctly Shorted Subprime Mortgages During The Financial Crisis Has Made A New Bet