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High yield bonds: Generating income, navigating volatility
With more volatility potentially on the horizon, we believe US High Yield bonds can provide a ‘port in the storm’.
Tim Leary, Senior Portfolio Manager on RBC GAM’s BlueBay U.S. Fixed Income team, explains how US High Yield (HY) bonds have continued to stand out as a reliable option for generating income while managing rate risk during periods of market uncertainty.
- The US HY index currently provides an Option Adjusted Spread (OAS) of 307 bps with a duration of just over 3 years, widening 14 bps this year despite a 7% return.
- Compared to US Investment Grade (IG) corporates, which yield 83 bps with a 6.4-year duration, HY bonds have offered higher income potential with notably lower interest rate exposure.
- With economic data releases expected to drive rate volatility, well-rated HY bonds have continued to deliver steady interest income for investors managing through changing conditions.
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By RBC Global Asset Management (U.S.) Inc.With more volatility potentially on the horizon, we believe US High Yield bonds can provide a ‘port in the storm’.
Tim Leary, Senior Portfolio Manager on RBC GAM’s BlueBay U.S. Fixed Income team, explains how US High Yield (HY) bonds have continued to stand out as a reliable option for generating income while managing rate risk during periods of market uncertainty.
- The US HY index currently provides an Option Adjusted Spread (OAS) of 307 bps with a duration of just over 3 years, widening 14 bps this year despite a 7% return.
- Compared to US Investment Grade (IG) corporates, which yield 83 bps with a 6.4-year duration, HY bonds have offered higher income potential with notably lower interest rate exposure.
- With economic data releases expected to drive rate volatility, well-rated HY bonds have continued to deliver steady interest income for investors managing through changing conditions.