FINSUM + Magnifi: Income Investors Get No Help from High Yield Bonds

(February 2021)

Two junk bond indices, Bloomberg Barclays U.S. Corporate High Yield Index and ICE BofA US High Index Yield, hit record lows both dipping to about 4%. The early stages of the pandemic were good for returns in the junk bond market, benefitting from similar bullishness in the broader stock market. The Fed’s has increased access to liquidity and with this made it easier for lower tiers of corporate bonds to access funds. Low returns in the junk bond market have pushed cautious investors into relatively appealing treasuries and riskier investors into innovative strategies. Even riskier floating rate bonds, mortgage real-estate investment trusts, and collateralized loan obligations are catching the eye of investors looking to earn a higher return.

(New York)


FINSUM + Magnifi: The driving force of the current low yield junk bond environment seems to be coming from policymakers responding to the pandemic. We can expect the low yield environment to continue given the Fed’s refusal to let off the gas pedal. 



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