Chart: The highest yielding bonds may not be worth the risk

  • #chartonthego

Yields are low, and that’s a challenge. But our latest #chartonthego reveals the highest yielding bonds may not be the answer.

Expecting your high yield portfolio to match the index yield? Be cautious—most high-yield bonds yield less

 

  • More than 70% of the high-yield universe currently yields less than the high-yield index (yield to worst: 5.6%). However, a growing share of the market yields upward of 7%, reflecting the increased possibility of defaults within select sectors such as energy, telecommunications, retail, and healthcare.
  • With yields frustratingly low, it can be tempting to stretch for more income by focusing on the highest yielding bonds. But this is a risky move. Many of these high-yielding bonds don’t offer enough incremental income over investment-grade bonds to justify the additional risk and volatility.

 

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