High-Yield Investors Could Find Better Returns In Stock ETFs

In a bull market and rising interest rate environment, high-yield, or "junk," bond investors could begin thinking about switching over to stock exchange traded funds. Mike Roberge, chief investment officer at MFS Investment Management, argues that stock returns could begin to outpace high-yield bonds, reports Jason Kephart for InvestmentNews. Anxious bond investors typically look at default risk in junk bonds, especially in a downturn. However, given the current price on bonds and their historically low yields, Roberge is less concerned about credit risk and points to interest rate risk. "High yield is totally dependent on the [Federal Reserve] to get a higher return than the coupon," Roberge said in the article. "High-yield rates have fallen so low that you now have interest rate risk. Historically that hasn't been the case. There used to be a cushion." The Barclays U.S. Corporate High Yield Index now provides an average yield... Read more