A More Docile Approach to Junk Bonds

Specifically, high-yield bonds, like their names suggest, provide opportunities for enhanced yields. Since 1994, the high yield bond market has exhibited an average spread of 509 basis points above Treasuries.

In a rising rate environment, with the Federal Reserve eyeing a tighter monetary policy and interest rate normalization, high-yield bonds may outperform. High-yield bonds have historically exhibited a lower sensitivity to interest rate changes. During periods of rising rates, high-yield assets have returned a mean 4.23%, compared to the -1.22% decline in investment-grade debt and -2.46% drawdown for U.S. Treasuries.

HYDW has a modified duration to worst of 2.94 years.

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