Why Current Yields are Pointing to Potentially Attractive Returns in High Yield
History may help explain how current yields can possibly be an effective indicator on the future returns of high yield investments. As a combination of factors has led to more repressed returns in recent years, the points and exhibit outlined below can further illustrate why we see a brighter outlook for this asset class in years to come.
- Over the last 15 years, current effective yields for the ICE BofA U.S. High Yield Index have proven solid in gauging what the benchmark’s realized returns will be looking like 5 years out.
- The Index’s most recent 5YR return of 3.12% was somewhat muted as effective yields were at subdued levels to start the period at 6.25% given the combination of ultra-low government interest rates and tighter credit spreads.
- As of 04/30/2023, the yield outlook appears more favorable with a current effective yield of 8.19.%.
Source: ICE Data Services and Morningstar Direct.
We believe high-yield bonds can serve as a key long-term diversifier and yield generator in portfolios. Learn more: The Case for A Strategic Allocation to High-Yield Bonds and SIHY.
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