Bonds with an Attractive Income

Bond yields may have fallen from their pre-credit crisis peak, but payouts remains above the historical average and can provide an attractive income

Emma Wall 4 December, 2013 | 9:18AM

When inflation soared in the late Seventies, fixed income yields followed, with corporate bonds reaching highs of 15%. Now inflation has reached a more palatable level bond yields have fallen, but there are still some attractive rates to be found. 

High yield has outperformed all other fixed income sectors this year. While the best performing equity stock market has been the S&P 500 - returning 30% - the global high yield sector has returned nearly 7%. 

Bonds are essentially a loan to a business, and are graded by credit rating, AAA being the most secure and least likely to default on the loan. The lower the credit rating, the more risky it is, and as a result investors are paid a higher rate of interest to compensate for the risk of default.

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About Author

Emma Wall  is former Senior International Editor for Morningstar

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