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A Quiet First Half for the High-Yield Market

Lower high-yield bond issuance has helped support prices recently, but that trend may not last.

Brian Moriarty: The high-yield market hasn't received much media attention this year, but that makes it the perfect time to review the category. From January through May, the median high-yield bond fund lost about 40 basis points, roughly on par with the 30-basis point loss of the category benchmark.

But that hides some of the nuance: Roughly a third of the category actually has positive returns year to date. These top performers all share one of two strategies in common: Either they have a short duration approach, or they are known for taking on a lot of credit risk, especially in the CCC part of the market. Both approaches reduce the risk of rising interest rates, which as we know has been the story this year in the bond market. Lagging funds include those that take on a lot of interest-rate risk, have a high level of BB holdings, or have a global mandate.

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