High yield still appeals

Bond markets may have suffered during the market dislocation of the past nine months, but investors should still have faith in the asset class, especially high-yield bonds

Within the global fixed income universe, high-yield corporate bonds have been hardest hit by the turmoil in financial markets and investors' low appetite for risk. Spreads on the asset class have soared to record highs, surpassing the levels reached during the scandals surrounding Worldcom and Enron earlier in the decade. This surge reflects investors' severe pessimism regarding the economic outlook and rising default rates over the next five years, as well as general risk aversion and the market's lack of liquidity. However, today's high-yield companies are different from those in the la...