Volatility is likely path forward for high yield after strong advance in first half of 2019

Aided by expectations of monetary easing, the second quarter of 2019 saw high-yield corporate bonds on both sides of the Atlantic continue one of their best starts to a year this century.

Gains came amid increased financial and political uncertainty, with the high-yield market pricing in a fairly benign future path; one – particularly in the US – that may not materialise.

We expect continued volatility in this asset class. Valuations are tight relative to history and fundamentals, especially in the US, are, in our view, likely to exhibit further signs of softening.