Hi, I’m Jennifer Poon from the T. Rowe Price Fixed Income team. Today, I’d like to talk about how high yield could potentially play a valuable role in portfolios.

Historically, it has offered higher returns than government bonds, with less volatility than equities, and its performance has been more resilient in equity drawdowns while still participating meaningfully in up markets.

In growth-focused portfolios, high yield can help reduce overall volatility. That’s because while it tends to move in the same direction as equities, it typically doesn’t fall as much in down markets – helping smooth the ride during equity drawdowns.

In more defensive portfolios, high yield can boost income and return potential. It offers a step up from government or investment grade bonds, without taking on the full risk of equities.

And importantly, a large portion of high yield’s return comes from its steady coupon income – potentially giving investors a more stable source of return over time, especially when defaults are well managed. 

So wherever you are on the risk spectrum, high yield may help improve overall outcomes.

For more information on this exciting asset class, speak to your financial adviser.