So the sweet spot is buying grace period notes?
I am not sure 30% Late 31-120 & Default in 3 months can justify ~15% discount, but may be you can try it out 
Do not forget even the worst grade (F/G) in primary market only has 7~10% default rate in a whole year.
Well given the average, I assumed there is some variation around the mean. Seemed like the group that this dispersion would be able to lead to profitable strategies (without actually knowing the dispersion). Of course you wouldn't buy the mean ones with those PDs
I noticed that the notes changed for better status typically have lower discount than others, which means one probably has to work really hard to squeeze returns
