Since Covid-19 disrupted markets in early 2020, high yield has been one of the best-performing fixed income sectors. In fact, it has significantly outpaced the Bloomberg US Aggregate Index (and Global Aggregate Index), US corporate bonds, emerging markets bonds and securitised credit — and by a wide margin.
02 April 2025
High yield has outpaced most fixed income sectors since 2020
Past results are not predictive of results in future periods.
Source: Bloomberg. As of 31 December 2024.
Investors often use spreads as an indicator of when to invest in the sector. But looking at data over the longer term, we believe factors such as yield to worst, earnings growth among the constituents of the S&P 500 and average credit quality can help provide a more accurate view of potential high-yield returns.
Although natural for investors to be concerned with tight current spreads in the sector, trying to market-time an allocation to high yield may be much more difficult and costly than investors expect.
Looking to history again, we believe the high-yield market has the potential to remain strong and could serve many investors well as a permanent portfolio allocation. Ultimately, high yield can potentially provide strong current income and returns over many market cycles — and most often with lower volatility than equities.
Here are five factors investors could consider when thinking about high yield.
Shannon Ward is a fixed income portfolio manager at Capital Group. She has 32 years of investment industry experience and has been with Capital Group for eight years. She holds an MBA from the University of Southern California and a bachelor's degree in psychology from the University of California, Santa Barbara. Shannon is based in Los Angeles.
David Bradin is a fixed income investment director. He has 20 years of industry experience (as of 12/31/2025). He holds an MBA from Wake Forest University and a bachelor's degree in mediated communications from North Carolina State University.