From Morningstar: 2024-05-21 06:29:00

High-yield bonds saw strong performance in 2023 with returns around 12-13% in USD terms, but replicating this in 2024 will be challenging. Despite this, demand for global high-yield bonds remains high due to strong fundamentals and limited supply, projecting a 5-7% return this year according to Tim Crawmer, Global Credit Strategist at Payden & Rygel.

Payden & Rygel’s investment strategy focuses on in-depth bottom-up analysis conducted by experienced global analysts. They see the best opportunities in the banking sector, particularly subordinated rated securities from systemically important banks, offering attractive valuations compared to other high-yield issuers.

The main risks for investors in high-yield bonds lie in potentially overvalued assets reflecting positive market conditions. Borrowing costs have increased, impacting high-yield issuers, especially those with high levels of debt. Companies with over-leveraged balance sheets will face challenges as rates rise, emphasizing the importance of avoiding such names in investment strategies moving forward.



Read more at Morningstar: The Best Opportunities in Global High Yield Bonds