High yield running out of room to rally?


"High yield simply fares better" in a rising rate environment, says JPMorgan's Peter Acciavatti, as his team sees junk bonds returning 5% in 2014 with default rates remaining below average. "It’s hard to get the market to back up substantially when default rates are as low as they are."

Not necessarily telling investors to avoid high yield, Morgan Stanley's Adam Richmond nevertheless believes the 4-year junk rally has about run out of steam. "Absolute returns are going to be low by historical standards ... We’re looking at improving growth, low defaults and rates likely rising ... It’s not a terrible environment for high yield, but the issue really is the math.”

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