By Brian J. Lavin, CFA, Senior Portfolio Manager, Head of U.S. High Yield Fixed Income
The risks and rewards of high-yield bonds. And how interest rates, the energy sector and tariffs factor in.
1. Higher risks require higher yields.
There are more risks in high-yield bonds compared with traditional fixed income. The asset class has navigated three significant default cycles over the past 30+ years. In each cycle, there was a meaningful decrease in high-yield bond prices, but they recovered alongside the economy, which proves the durability of the asset class to investors. High-yield bonds