After the poor performance of junk bonds this year, investors may see that high-yield debt valuations look much better, with yields near multi-year highs. HYG has a 6.63% 30-day SEC yield, JNK shows a 6.62% 30-day SEC yield, PHB has a 4.75% 30-day SEC yield and HYLD has a 10.53% 30-day SEC yield.
“One positive from this poor performance is that valuations for high-yield bonds now appear much more reasonable, creating a potentially attractive entry point for investors,” Desai added.
Nevertheless, there are still some risks. For instance, Desai argues that high-yield bonds could see a sell-off during a rising rate environment after years of low interest rates pushed more investors into speculative-grade debt in search of yield. [3 Reasons to Consider Short Duration High Yield]
For more information on the speculative-grade debt market, visit our junk bonds category.
Max Chen contributed to this article.