Why High Yield Bond Managers are Embracing Risk

Not all junk bond investing is created equal. Here's why some fund managers are embracing more credit risk

Shannon Kirwin 16 July, 2021 | 9:52AM
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Not all junk bond investing is created equal. BB-rated debt sits at the top of the below-investment-grade credit-quality rating spectrum and carries the lowest relative credit risk among its fixed income peers.

With each step down the credit-rating ladder, from AAA through A and BB, the likelihood of the bond issuer defaulting increases exponentially. Indeed, according to data from the S&P Global Ratings 2020 Annual Global Corporate Default And Rating Transition Study, the global corporate annual default rate for issuers rated BB was roughly 1% last year, compared with roughly 4% for issuers rated B and almost 50% for issuers rated CCC, CC, and C.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Shannon Kirwin  is a fund analyst with Morningstar

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