Despatches  

The prospects for high yield bonds

  • Describe the dynamics of the high yield bond sector
  • Explain inflation in this context
  • Identify the impact of quantitative tightening
CPD
Approx.30min
Prospects for high-yield bonds
How inflation and economic indicators are affecting one area of fixed income
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Everyone is experiencing high levels of inflation across the board, and price rises also have an impact on investments.

This is particularly felt in the bond sector, which is adversely affected by inflation. Less so is the impact felt by high yield bonds, which have become more acceptable as a source of income in recent years due to lack of alternative sources of income.

The problem is the fear of recession, because as prices continue to rise so people will be taking more money out of the economy to pay for basic living costs.

For high yield bonds inflation is a positive, but for them to thrive there needs to be a positive growth environment, which is why some investors are growing concerned due to the difficult scenario laid out by the Bank of England.

However, as set out in this article there are ways to manage these dynamics, so opportunities still exist.

This article is worth an indicative 30 minutes' CPD.

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. Inflation is good for high yield bonds, true or false?

  2. What else do high yield bonds need?

  3. What is Invesco's Rhys Davies' criticism of QE on the bond markets?

  4. According to Chris Higham at Aviva Investors, we are at the start of a rate rising cycle, true or false?

  5. Which part of the high yield market is most likely to feel the impact of quantitative tightening, according to Joseph Lind at Neuberger Berman?

  6. Why is John Mawby of Pictet considering longer-duration assets?

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You have successfully answered all the questions correctly, well done!

You should now know…

  • Describe the dynamics of the high yield bond sector
  • Explain inflation in this context
  • Identify the impact of quantitative tightening

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