High yield bonds have reached a particularly interesting point, according to PineBridge Investments. While spreads remain tight by historical standards, all-in yields sit closer to their 20-year median. At the same time, the market’s weighted average price still trades at a meaningful discount to par, while duration and tenor are near historic lows. The asset manager argues that this divergence creates an attractive entry point for high yield investors.
However, PineBridge also notes that today’s volatile US policy backdrop could create a more challenging environment for certain issuers. But the asset manager believes this risk can be mitigated by avoiding or minimising exposure to CCC-rated bonds, which remain more vulnerable to shifting political and economic conditions. “The higher-rated (BB and B) portion of the market looks especially compelling,” says John Yovanovic, Co-Head of Leveraged Finance.
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