Metric analysis

The One Metric All High Yield Investors Should Know

Maks_Lab/iStock via Getty Images

Five-year returns closely tracked performance at the start of the period

Five-year returns closely tracked performance at the start of the period

Bloomberg and AllianceBernstein

Historical and current analyzes and forecasts do not guarantee future results. An investor cannot invest directly in an index and its performance does not reflect all fees and expenses or represent the performance of any AB fund.

As of March 31, 2022*Worst-Rate Yield as of Date Indicated†

Five-year annualized return from date shown

High yield bonds have a reputation for being volatile. But history shows that the US high yield sector’s worst performance was a reliable indicator of its performance over the next five years.

In fact, US high yield bonds have behaved predictably, even in difficult markets. The relationship between worst-case yield and five-year future returns remained stable during the global financial crisis, one of the most stressful periods of economic and stock market turbulence on record.

Why? High yield bonds provide a steady stream of income that few other assets can match. And when high-yield issuers redeem their bonds before maturity, they pay bondholders a premium for that privilege. This helps compensate investors for losses incurred when certain bonds default.

What does all this mean for investors today? High-yield bonds can experience some short-term volatility, but investors with a long-term view can ride out short-term dips.

The opinions expressed herein do not constitute research, investment advice or trading recommendations and do not necessarily represent the views of all of AB’s portfolio management teams, and are subject to revision over time.

Original post

Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.