High-Yield Bonds Market Outlook - 2030
A high-yield bond, also known as a junk bond, has a higher interest rate and lower credit rating than investment-grade bonds. These bonds carry more risk and return potential than traditional bonds. Junk bonds are small investments in a diversified portfolio of financially troubled companies with a high risk and reward potential. However, high-yield corporate bonds pay higher yields than other traditional-grade bonds. In addition, these bonds are still less volatile and more stable than the equity market. Therefore, high risk & return, diversified portfolio, improved business, and better investment opportunities than traditional bonds are expected to foster the growth of the market in the future.
The global high-yield bonds market is segmented on the basis of type, end user and region. Based on type, the market is divided into zero-coupon bonds, equity-linked bonds, extendable notes, and others. On the basis of end user the market is divided into retail investors, institutional investors, pension funds, hedge funds, and others. Geographically, the high-yield bonds market is analyzed across several regions such as North America, Europe, Asia-Pacific, and Latin America, Middle East & Africa (LAMEA).
Key players operating in the global high-yield bonds industry include Alcentra, State Street Corporation, AEGON, Northern Trust Corporation., T.Rowe Price Investment Services, Kames Capital, The Vanguard Group, Edward Jones, Charles Schwab & Co., and BlackRock. These companies have adopted several strategies such as product launches, partnerships, collaborations, mergers & acquisitions, and joint ventures to strengthen their foothold in the global high-yield bonds market.
COVID-19 Impact Analysis
- In the wake of the COVID-19 pandemic situation, the performance of junk bonds has surpassed the benchmark returns and the returns from high-yield grade bonds increased significantly. In March 2021, the spread on high-yield bonds increased with nearly 1,000 basis points than traditional bonds.
- Furthermore, financial difficulties that businesses face necessitate more market financing, putting strong upward pressure on the bond market and resulting in higher returns than in normal circumstances. Therefore, global health crisis has a moderate impact on high-yield bonds.
Top Impacting Factors
Higher yield compared to traditional investment-grade bonds, diversified portfolios with capital appreciation, and lucrative long-term return potential with flexible exit options drive the growth of the market. However, a higher risk of losing capital is expected to hamper the growth of the market. Contrarily, digital trade over exchange (ETF) is expected to create lucrative opportunity for the market in the coming years.
Higher Yield Rate Compared to Traditional Investment-Grade Bonds
Junk bonds have a higher yield, as it involves investment in a portfolio that includes both low-risk government securities and risky equities. In addition, diversification does not protect investors against loss. It decreases the overall portfolio risk and improves the consistency of returns. Generally, junk bonds have a low rating; however, the return on junk bonds has outperformed the benchmark return. Higher default credit risk and lower ratings are significant drawbacks of the high-yield bonds market. Therefore, the performance of higher yield bonds compared to traditional grade bonds is a major driver of this market.
Long Term Return Potential With Flexible Exit Option
High-yield bonds generally have shorter maturities with a flexible exit from bonds. Normal bonds are issued for durations of 10 years or less and are typically redeemable after four or five years. In addition, during the economic cycle's recovery phase, high-yield bonds outperformed compared to several other fixed-income investment classes. As a result, the market growth in this sector is driven by high yield bond, which does not require favorable economic conditions and has a high potential for higher long-term returns with a flexible exit option.
Key Benefits of the Report
- This study presents analytical depiction of the high-yield bonds high-yield bonds market forecast along with the current trends and future estimations to determine the imminent investment pockets.
- The report presents information related to key drivers, restraints, and opportunities along with detailed analysis of the high-yield bonds market share.
- The current market is quantitatively analyzed to highlight the high-yield bonds market growth scenario.
- Porter’s five forces analysis illustrates the potency of buyers & suppliers in the market.
- The report provides a detailed high-yield bonds market analysis depending on the present and future competitive intensity of the market.
Questions Answered in the High-Yield Bonds Market Research Report
- Which are the leading players active in the high-yield bonds market size?
- What are the detailed impacts of COVID-19 on the market?
- What current trends will influence the market in the next few years?
- What are the driving factors, restraints, and opportunities in the high-yield bonds market trends?
- What future projections would help in taking further strategic steps?
High-Yield Bonds Market Report Highlights
By End User
Key Market Players
State Street Corporation, Alcentra, Kames Capital, AEGON, Northern Trust Corporation., BlackRock, Edward Jones, Charles Schwab & Co., The Vanguard Group, T.Rowe Price Investment Services