We evaluate the high-yield market by looking at three key factors: fundamentals, valuation, and “technicals,” or the balance of supply and demand. We are neutral on all three. Looking first at fundamentals, we see an economic landscape marked by countervailing trends. GDP figures in the United States continued to lag past recoveries. Nonetheless, corporate fundamentals
Coming out of the financial crisis in 2008–2009, corporations took aggressive steps to shore up their balance sheets and rein in expenses, and today they are running very lean, profitable organizations, with the added benefit of having record levels of cash on hand. It has been a very attractive combination for investors, especially given the
A modest pace of economic recovery has helped to keep the corporate default rate below historical averages and provides favorable conditions for high-yield bonds. Lower-rated bonds may offer higher yields in return for more risk.