“What we have seen so far is a consolidation, not a reversal,” Gartside said in the article. “The market is much better prepared [for a US interest rate rise this year]than it was before the taper tantrum — both from a positioning and valuation perspective.”
Back in 2013 when the Federal Reserve first hinted at tapering its quantitative easing program, the yield on the BAML junk bond index surged to 6.9% and then settled after fixed-income investors came pouring back into the asset class.
Despite the risk of rising interest rates, there is high demand for higher yielding assets among investors, including insurance companies and pension funds that are trying to bolster returns to meet liabilities.
SPDR Barclays High Yield Bond ETF
For more information on speculative-grade debt, visit our junk bonds category.
Max Chen contributed to this article.