Invest
High Yield Bonds: At An Inflection Point?
By The InvestQuest  •  October 5, 2020
Difficulty: Moderate 1) Where are we now? US High Yield trading at 5.7% yield-to-worst 2) The Good: Default rates are lower than expected 3) The Bad: For defaulted bonds, recovery values are at record lows 4) We might be reaching an inflection point 5) What returns should we expect if we invest in High Yield now? The InvestQuest’s View

While we see stronger fundamentals for the High Yield Bond market, valuations are still unattractive to us at this point. We estimate that High Yield Bond investors should roughly expect 2.9% total returns for a well-diversified portfolio for the year ahead.

To generate a 3% return, we would personally prefer to sell a 1-year put option on the S&P 500, with a strike at 2,500 (26% below the current index level of 3,386). For such a strategy, we would receive the 3% option premium upfront and if

...
Read the full article
By The InvestQuest
The Invest Quest was founded on the premise that the average investor makes sub-optimal investment decisions as a result of information asymmetry. It is our hope that this platform will narrow the information gap against the “smart money”.
LEAVE A COMMENT
LEAVE A COMMENT

Your email address will not be published.

*

Your Email Address will not be published
*

Read More Articles
More from thefinance