High Yield Spotlight

While the trend of junk bonds outperforming broad Treasuries hasn’t ended yet, it’s definitely shallowing up. The anticipated Fed rate cutting cycle has brought long-end yields lower, but conditions may soon turn against riskier asset classes. One of the largest closed-end credit funds out there is the PIMCO Corporate & Income Opportunity Fund (PTY). This fund is a good test case for whether the value is worth the cost.

In the fixed income world, U.S. junk bonds have been one of the best-performing groups coming out of the 2022 bear market. Maybe less recognized is the performance of emerging markets bonds, which have been similarly successful. The Western Asset Emerging Markets Debt Fund (EMD) is one of the few EM bond funds in the CEF space, but it’s also one of the better ones.

While it hasn’t necessarily been a strategy that’s been in favor for some time, dividend investing still presents one of the best ways to create long-term wealth. This is especially the case for retirees, who are probably looking for some combination of capital preservation and steady, predictable income. The John Hancock Premium Dividend Fund (PDT) targets income-producing securities, but manages to keep risk levels fairly contained despite the use of leverage.