Hermes: Four golden rules for investing in high yield bonds

Hermes' Fraser Lundie has outlined four golden rules investors should follow to invest successfully in high yield bonds, at a time of strong headwinds for the asset class.

Speaking at last month's IW Bond Focus event, the group’s co-head of credit said liquidity in particular has become challenging in the high yield market, so investors must try to diversify to reduce this risk. “There are four things I think should and need to be done to make high yield a viable investment today, because the valuation and liquidity headwinds are like nothing we have seen in 20 years,” he said. Lundie’s first suggestion is investors should avoid callable bonds at the moment. Some three-quarters of global high yield issuance has an embedded call. This is an attractive op...