- High-yield bonds had a tough start to the year in the face of high inflation, and yields have now reached a level many investors consider to be attractive.
- While inflation expectations have come down in recent weeks, there is still uncertainty about how far the Fed will go in its tightening cycle.
- At this point, I believe HY bonds can be hit by a second whammy in the form of a recession.
- This could have far worse consequences for junk bonds, especially if the Fed can't come to the rescue and liquidity dries up.
- I'm cautious about the outlook for USHY and I think it's better to stay away from it for the moment rather than to engage in yield chasing.
For further details see:
USHY: High-Yield Bonds Haven't Bottomed Yet