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High-Yield Bond Market Resumes Supply, Global Investors Resume Selling

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High-yield bond issuers switch on supply valve, interest rates make junk bonds attractive, and global investors resume selling.

a graph showing the yield curve of high-yield bonds compared to investment-grade bonds over time, with the high-yield curve showing higher peaks and deeper valleys.

Held at bay through the March banking crisis, US high-yield bond issuers switched on the supply valve in April, generating $18.4 billion, a 22% increase from March. Despite the market volatility caused by the COVID-19 pandemic, the high-yield bond market has been able to remain somewhat stable. However, global investors have resumed their selling of high-yield corporate bonds after a brief respite in January, with outflows reaching $1.6 billion in the week ending March 11, the largest in four weeks.

Rising interest rates are making shorter-duration, high-yielding junk bonds particularly attractive for income investors. BlackRock Floating Rate Income Strategies Fund Inc invests in floating-rate debt securities offering rate protection. The fund's investment objectives are to provide high current income and to preserve capital. The fund's portfolio includes securities from a variety of industries, including banking, healthcare, and technology.

Our guide to finding the best opportunities for high yields in nine categories — from super-safe options to higher-risk choices with big returns. The guide provides insight into the different types of high-yield bonds and the risk and benefits associated with each. It covers topics such as municipal bonds, corporate bonds, emerging market debt, and more.

South Korea has come up with a novel way of ensuring that weaker companies get cash during economic slumps: it's offering tax incentives to investors who buy high-yield corporate bonds. The move is aimed at encouraging investment in the country's smaller firms, which often struggle to raise capital. Inc. ('EquipmentShare'), one of the fastest-growing integrated equipment rental and equipment asset management companies, has issued $640 million in high-yield bonds to finance its expansion plans. The bonds are rated B2 by Moody's and B by S&P. The company plans to use the proceeds to expand its rental fleet, invest in technology, and pursue strategic acquisitions.

High-yield bonds are debt securities issued by corporations that can provide a higher yield than investment-grade bonds, but also come with a higher risk of default. They are typically issued by companies with lower credit ratings, which makes them more susceptible to economic downturns and changing market conditions.

Improved credit quality, expectations for a mild recession or soft economic landing, and current valuation discounts all bode well for high-yield bonds. However, the high-yield market remains vulnerable to shifts in investor sentiment, changes in interest rates, and geopolitical risk.

yield bonds interest rate hike investors

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