Another misunderstanding investors have relating to bonds is that a bond is issued and then goes away into the hands of investors, never to trade again. Most people do not understand that corporate bonds have an active and liquid secondary market, much like stocks. The difference is that the “bond exchange” is not a physical location like the New York Stock Exchange. Rather it is an electronic market created and maintained by large banks and investment banks. These features apply to both high yield and investment grade bonds.
For more on the history and development of the high yield asset class, a discussion the legislation and ratings methodologies that have created what we see as opportunities in the marketplace, and view compare historical risk adjusted returns with other asset classes, click to read our updated piece, “The New Case for High Yield: A Guide to Understanding and Investing in the High Yield Market.”
1 Blau, Jonathan, James Esposito, and Amit Jain. “2015 Leveraged Finance Outlook and 2014 Annual Review,” Credit Suisse Global Leveraged Finance. February 19, 2015, p. 136.
This article was written by Tim Gramatovich, CFA, CIO & Heather Rupp, CFA, Director of Research for Peritus Asset Management, the sub-advisory firm of the AdvisorShares Peritus High Yield ETF (HYLD)