Manager perspectives

A slow and steady approach to the high-yield bond market

February 10, 2023

2022 was a rough year for fixed income in general and the high-yield corporate sector was no exception. How attractive is high-yield today, in your view, and why? Where do you expect the high-yield market is headed?
Predictions for a 2023 recession in the U.S. are on the rise. What’s different about this high-yield corporate bond market when compared with what we experienced at the start of the global financial crisis (GFC) in 2007?

High-yield credit quality has improved since the global financial crisis

This bar chart shows that the credit quality of high-yield bonds increased between 2007 and 2022. Most notably, 50% of high yield bonds were rated BB in 2022, just below investment grade, compared with 36% in 2007.
How do your expectations for the 2023 performance of traditional high-yield bonds versus bank loans (or even private credit) differ?
Not all high-yield corporate bond strategies are the same. What’s your approach to investing in the asset class and what makes your approach unique or more effective? How has the current economic environment been challenging or fortuitous for your approach?
What steps do you take to assess whether investors will be adequately compensated for the added risks of investing in high-yield bonds?
How are you positioning your high-yield exposure considering the current market? Which types of bonds are you buying or avoiding? How large is your high-yield allocation across Vanguard portfolios relative to “normal” times?
What has surprised you about the high-yield market over the last year?
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Meet the expert

Michael Chang
Vanguard Information and Insights

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