Starved for High Yield? Wait a Little Longer

Late in the second quarter, the financial markets were hammered by Bernanke’s remark that the Fed could taper its quantitative easing policy before year’s end. Treasury yields soared in the weeks following his statement, leading to a meltdown in just about any financial asset with a yield above 2.5%. But that situation has now been turned on its head, with substantial relief rallies in the various high-yield plays that were so popular through 2012 and the first three months of this year.

Short-term performance of the yield plays remain dependent on Fed statements and/or the outlook for quantitative easing. This also means high-yielding assets are vulnerable not just to additional Fed-speak, but also positive shifts in incoming economic data. While high-yield assets have enjoyed a strong run in recent weeks, they remain on very unsteady ground. At this stage, yield-hungry investors can afford to be patient rather than attempting to milk additional returns from this rally.

Source: Investor Place

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