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Whatever the causes, the numbers bear out America's slippage. It is still well ahead of Europe in hedge-fund and mutual-fund assets, securitisation, syndicated loans, and turnover in equities and exchange-traded derivatives. In all but one of these, however, the gap narrowed in 2005. Europe's corporate-debt market overtook America's last year (see chart 1), although America still leads in high-yield “junk” bonds, a distinction less dubious than it once was.

Question:

distinction = discrimination / honor?

What does this 'distinction' restrict? The fact that America still leads or the noun "junk" bonds?
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"honor"
and it's indeed the "honor" of leading in high-yield “junk” bonds
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A "dubious distinction" is one that doesn't really carry any honor with it, however.

You can also say "that's a dubious distinction" when you don't really see much of a difference between two things - they aren't that distinct from each other.

If I understand this paragraph, the author is suggesting that in the past, leading in "junk bonds" was a "honor" without much real honor (it was a dubious distinction), but now they are gaining a little more credibility - so there is less of a dubious nature to it.
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Comments  
GG's right: its a negative honor, a dishonor, a bad reputation, a disrepute
I edited my first posting to listed it as a so-called honor, "honor"
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