Investors Shift to High-Yield Bonds as 30-Year Treasury Yield Tops 5.19%

2 articles · Updated · CNBC · May 20

High-yield bonds are drawing fresh interest during rate volatility, with BondBloxx arguing they have delivered better returns with less interest-rate risk than long-dated Treasurys.
10 years of annualized outperformance versus Treasurys, investment-grade corporates, mortgage-backed and asset-backed securities has been driven largely by high coupons and the sector’s shorter duration.
Improving credit quality is reinforcing demand: Wells Fargo said the share of the riskiest bonds has fallen, while larger, more profitable BB-rated issuers now make up more of the market.
Less than five years of duration and selective exposure to B-rated debt look most attractive to some managers, while BondBloxx says even CCC bonds offer opportunity if backed by strong earnings and refinancing progress.
10% to 15% of fixed-income allocations is the rough portfolio role BondBloxx suggests for high yield, though the asset class still trades more like equities and requires careful issuer selection.

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