High yield bonds: No longer junk but still high yield

Within fixed income, high yield bonds reflect an area of credit that has been structurally transformed. The evolution of the high yield market is evident when viewing the quality of the asset class by rating, fundamentals and issuer characteristics. These market shifts operate in tandem with portfolio allocation criteria – liquidity, correlation and risk-adjusted returns.

This paper outlines how the high yield bond market has fundamentally changed since the Global Financial Crisis and how it compares to other markets within leveraged finance. High yield bonds offer attractive risk-adjusted returns with features that can limit downside risks while offering total return potential through active management.