Global high yield… don’t worry, be happy

Investors might prefer to focus on the yields on offer in the asset class, rather than worry about what, we believe, is the misplaced fear of defaults.

The second quarter of 2024 registered positive returns across the globe in high yield. Emerging markets, once again, led the way, followed by Europe and the US. Credit spreads were broadly unchanged, and BB rated bonds outperformed single B rated bonds. Demand for the asset class persisted as fundamentals and global growth remained robust, and the yields on offer, standing at more than 7%, continued to appeal to many investors.

The strategy continues to target a higher income than the comparative benchmark, expressed through an overweight position in higher spread global names. Our view remains that spreads adequately compensate for the degree of credit risk undertaken (see outlook).