High yield bond strategies have proven to be far more resilient than investors may have expected them to be.
Before the new year began, concerns over economic uncertainty led some traders to move their fixed income assets toward investment-grade options. Despite all this, 2025 has so far been a relatively good year for high yield bonds.
A February outlook from the Eaton Vance team offered an encouraging reading on the high yield landscape. In the outlook, the Eaton Vance high yield experts cited a number of reasons to support the case for junk bonds.
To begin, the outlook highlighted that in both the U.S. and Europe, high yield bonds are far outpacing their investment-grade peers in terms of income potential. The perks of high yield bonds are not ending at yield opportunities, either.
Eaton Vance’s outlook notes that junk bonds can also help investors build strong long-term returns. Given their higher starting yields, these bonds can give investors a distinct head start when it comes to growing over a longer time horizon.
Even though high yield bonds have had a good run so far, there are a few risks that investors should remain wary about. Along with the uncertainty of upcoming U.S. federal policy, the Eaton Vance team noted that high yield dispersion rose significantly in 2024.
“As a result, a discerning approach to security selection is imperative, not only to mitigate risk but to enable alpha capture,” the Eaton Vance team noted. “Passive high yield bond funds, which are designed to track a specific market index, are structurally incapable of such discernment. Even active managers who lack adequate research capabilities, long sector experience and proven investment strategies may find themselves at a disadvantage.”
Opportunity Knocks for EVHY
All in all, investors looking to take advantage of opportunities may wish to do so through an experienced active manager. For instance, the Eaton Vance High Yield ETF (EVHY ) may offer an attractive solution.
EVHY provides disciplined exposure to the high yield universe through the expertise of the Eaton Vance portfolio team. The fund’s strategy prioritizes exposure on higher-quality bonds within the high yield space.
So far, this strategy has continued to offer compelling income for its investors. EVHY is offering a subsidized 30-day SEC yield of 5.83%, as of February 27th, 2025.
This yield also comes with strong long-term growth of capital. As of February 28, 2025, EVHY’s NAV has jumped more than 8% over the last 12 months.
For more news, information, and analysis, visit The ETF Yield Channel.
