Debt in the B tier of the ratings scale that's less exposed to the risk of rising interest rates compared with BB debentures and less vulnerable to default than CCC is attractive, Bank of America analysts led by Oleg Melentyev wrote in an April 20 note to investors.
"There are very few places in the fixed-income universe where investors could expect a similar degree of protection," the Bank of America analysts said of high yield.
While Moody's raised its year-end global speculative-grade default forecast this month to 3 percent from 2.6 percent after 11 companies defaulted in March, the figures compare with the ratings firm's long-term average 4.8 percent. The default rate was at 2.3 percent as of the end of the first quarter, up from 1.8 percent at year-end.
"It's the best asset to hold right now" unless Europe's crisis creates a "systemic risk," Kingman Penniman, chief executive officer of KDP Investment Advisors Inc. in Montpelier, Vermont, said of high-yield bonds in a telephone interview. "High-yield is a class that can absorb concerns in interest rates."