“We consider investing in high-yield corporate bonds to be similar to investing in the equities of companies with highly leveraged balance sheets,” says Morningstar analyst Timothy Strauts.
“Corporate bonds are denoted high yield for the sole reason that firms issuing them are highly leveraged,” he added. “With increased leverage comes the increased probability of default and bankruptcy.”
SPDR Barclays Capital High Yield Bond
Full disclosure: Tom Lydon’s clients own HYG and JNK.