M&G Bond Vigilantes: Is there any value left in high yield?

Shining a light on floating rate notes

High yield bond valuations have been on a rollercoaster ride. The lows of March, when investors shunned riskier assets for safer ones, saw valuations for conventional high yield bonds cheapen to historic lows.

But a restoration of investor appetite, thanks in large part to a fast response by the US Federal Reserve in providing liquidity and supporting the asset class, has seen valuations recover.  While some of the value has clearly disappeared from the broad high yield market, not all parts of the high yield universe have recovered to the same extent. High yield floating rate notes (FRNs) are an example of a high yield asset class that has lagged the rally. They continue to offer compelling value; the yield-to-worst (YTW) for global high yield is currently around 6.3%, compared to a YTW of...