Writing for Firstlinks, CEO Damien McIntyre examines the world of high yield bonds.
A thorough understanding of how sub-investment grade bonds work, and the reasons for their high yield, can help investors discard the ‘junk’ label, and potentially replace it with ‘juicy’.
Interest rates might be predicted to rise in the US but for many months they have been kept notoriously low globally as governments use monetary policy to stimulate economies out of COVID-19 induced lulls. As a result, the return on investment grade bonds has also been low, and not much better than cash. But it is possible to generate equity-like returns from bonds, with a lower risk than previously thought.