SPHY - Spotlight On High Yield Credit Amid Declining Yields In Fixed Income Markets
An interesting dynamic has emerged in high yield ((HY)) markets following the overall rally in bond yields year to date. On the one hand, the presumed "margin of safety" that yield provides against future defaults has declined, thereby shifting the potential distribution of future returns more to the downside. On the other hand, the rise of low- or negative-yielding fixed income assets more broadly, coupled with investors' need for income, has created a powerful technical factor driving demand for high yield credit.
While these two opposing forces create both pitfalls and opportunities for high yield