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2021-05-21

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This high-yield strategy may be best for income as inflation becomes a threat

Kevin Loome of T. Rowe Price highlights the advantages of junk bonds in a growing economy with risin

This high-yield strategy may be best for income as inflation becomes a threat

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{"i18n":{"language":"zh_CN"},"data":{"magic":2,"id":139841846,"tweetId":"139841846","gmtCreate":1621608590485,"gmtModify":1631888670916,"author":{"id":3566003178580137,"idStr":"3566003178580137","authorId":3566003178580137,"authorIdStr":"3566003178580137","name":"JiaJun","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[],"fanSize":1,"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"extraTitle":"","html":"<html><head></head><body>Nice</body></html>","htmlText":"<html><head></head><body>Nice</body></html>","text":"Nice","highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"link":"https://laohu8.com/post/139841846","repostId":2137909732,"repostType":4,"repost":{"id":"2137909732","kind":"highlight","pubTimestamp":1621605926,"share":"https://www.laohu8.com/m/news/2137909732?lang=&edition=full","pubTime":"2021-05-21 22:05","market":"us","language":"en","title":"This high-yield strategy may be best for income as inflation becomes a threat","url":"https://stock-news.laohu8.com/highlight/detail?id=2137909732","media":"MarketWatch","summary":"Kevin Loome of T. Rowe Price highlights the advantages of junk bonds in a growing economy with risin","content":"Kevin Loome of T. Rowe Price highlights the advantages of junk bonds in a growing economy with rising inflation.<img src=\"https://static.tigerbbs.com/d8f72122ebea9d0d1d2abd4cf3b0c62d\" tg-width=\"1260\" tg-height=\"840\" referrerpolicy=\"no-referrer\">Ford Motor Credit is one of the larger issuers of high-yield bonds held by the T. Rowe Price U.S. High Yield Fund. (Bloomberg)High-yield bonds, also known as junk bonds, have been a popular class of investments in a yield-starved world.But interest rates are still low, while inflation has been picking up, as the economy bounces back from its coronavirus swoon in 2020.This means income-seekers might be afraid of a decline in bond prices as interest rates rise.Kevin Loome of T. Rowe Price <a href=\"https://laohu8.com/S/TROW\">$(TROW)$</a> makes the case that in a growing economy with inflation, high-yield bond portfolios can have advantages over investment-grade portfolios.Loome is the portfolio manager for the T. Rowe Price U.S. High Yield Fund. He joined T. Rowe Price in 2017 as part of the firm's acquisition of the Henderson High Yield Opportunities Fund, which was originally established in May 2013. He is based in Philadelphia.Fund outperformanceThe T. Rowe Price U.S. High Yield Fund's institutional shares are rated five stars by Morningstar. That's the investment research firm's highest rating. The fund's Investor share class and Advisor share class have four-star ratings.Here are total returns (with dividends reinvested) through May 14 for all three classes for the fund against its benchmark, the ICE BofA High Yield Constrained Index, and two large exchange-traded funds -- the SPDR Bloomberg Barclays High Yield Bond ETF <a href=\"https://laohu8.com/S/JNK\">$(JNK)$</a> and the <a href=\"https://laohu8.com/S/EEME\">iShares</a> iBoxx $ High Yield Corporate Bond ETF <a href=\"https://laohu8.com/S/HYG.UK\">$(HYG.UK)$</a>, which are both rated three stars by Morningstar.<img src=\"https://static.tigerbbs.com/3a25d42954658e7731b127ec7a3ba699\" tg-width=\"1259\" tg-height=\"591\" referrerpolicy=\"no-referrer\">The T. Rowe Price U.S. High Yield Fund's institutional shares have a 30-day SEC yield of 4.49% and a 30-day annualized dividend yield of 5.40%. For the Investor shares (TUHYX) the 30-day SEC yield is 4.34% and the 30-day annualized yield is 5.26%. For the Advisor shares, the 30-day SEC yield is 4.20% and the 30-day annualized yield is 5.08%.For five years, the T. Rowe Price U.S. High Yield Fund's three share classes rank in the 11th percentile or higher in Morningstar's \"U.S. Fund High Yield Bond\" category. From the fund's inception as the Henderson High Yield Opportunities Fund (May 2013), the three share classes rank in the third percentile or higher.Concentrated portfolioDuring an interview, Loome said his fund has advantages over its benchmark index and against the above ETFs because its size enables it to run a more selective or concentrated portfolio.The T. Rowe Price U.S. High Yield Fund has about $500 million in assets, although the total assets under management at T. Rowe Price under the same strategy managed by Loome is about $2.5 billion. That compares to an overall high-yield bond market of $1.5 trillion tracked by the ICE BofA High Yield Constrained Index. The SPDR Bloomberg Barclays High Yield Bond ETF has $10.3 in assets and the ishares iBoxx $ High Yield Corporate Bond ETF has $21.2 billion.Loome said his portfolio is holding bonds issued by about 100 companies, and that its limit is 200 companies, but that \"the average mutual-fund manager in this space owns about 450.\"Loome also invests in leveraged loans, which are non-investment-grade commercial loans. Among the fund's top holdings are bonds issued by Ford Motor Credit (a subsidiary of Ford Motor Co. <a href=\"https://laohu8.com/S/F\">$(F)$</a>), Occidental Petroleum Corp. <a href=\"https://laohu8.com/S/OXY\">$(OXY)$</a> and American Airlines Group Inc. <a href=\"https://laohu8.com/S/AAL\">$(AAL)$</a>.A high-yield bond fund is a play not only on more income than you can get from investment-grade bonds, but on credit risk. Higher default rates mean more opportunities to scoop up bonds at discounted prices, leading to gains when the bonds mature, provided the fund manager has gotten the credit analysis right.Lower-rated or unrated issuers' bonds will trade at significant discounts during times of market turmoil, as they did early in the coronavirus pandemic last year. Then as interest rates plunged and asset values recovered, the junk bond market values followed suit, explaining the high double-digit returns for 2020.But in a universe of about 1,000 high-yield issuers, \"If you are holding 600 of 1,000, you cannot argue that you are adding credit selection,\" Loome said.So 2020 was an example of a year in which high-yield bond-fund mangers had \"a total return plus yield opportunity,\" Loomis said. In the current environment, with prices having recovered, \"the best you can have is an income opportunity,\" he said. But there are also price advantages for junk bonds in the current economic climate.Advantages in a rising-rate environmentWe're in the midst of a pullback for U.S. stocks, which may reflect investors' fears of inflation, in the wake of a massive increase in the money supply from Federal Reserve bond purchases and the federal government's stimulus. Consumer prices in the U.S. have risen 4.2% over the past year -- the largest increase since 2008.Short-term interest rates remain near zero because the Fed's target range for the federal funds rate is zero to 0.25%. But that may change if the Federal Open Market Committee believes inflation is likely to remain above its 2% long-term target. Meanwhile, the market has already reacted with a bond selloff that has pushed long-term yields higher. The yield on 10-year U.S. Treasury notes has increased to 1.65% from 0.93% at the end of last year.Investors holding shares of bond funds will be nervous as interest rates rise because bond market values -- and the funds' share prices -- will go down.\"When you look at the availability of fixed income and where interest rates are, the least-worst place to be is leveraged loans and high yield (bonds), because they have shorter term structures and the highest coupons,\" Loome said.Why would junk bonds and non-investment-grade commercial loans be the best fixed-income space in a rising-rate environment? There are three reasons:So a high-yield bond fund enjoys the advantages of an improving economy, because it means defaults are less likely. It enjoys pricing advantages, especially if its duration is very low, because the portfolio will turn over more quickly with freed-up money being invested in new bonds paying more.","source":"lsy1603348471595","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>This high-yield strategy may be best for income as inflation becomes a threat</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nThis high-yield strategy may be best for income as inflation becomes a threat\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-05-21 22:05 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.marketwatch.com/story/this-high-yield-strategy-may-be-best-for-income-as-inflation-becomes-a-threat-11621596885?mod=home-page>MarketWatch</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nKevin Loome of T. Rowe Price highlights the advantages of junk bonds in a growing economy with rising inflation.Ford Motor Credit is one of the larger issuers of high-yield bonds held by the T. Rowe ...\n\n<a href=\"https://www.marketwatch.com/story/this-high-yield-strategy-may-be-best-for-income-as-inflation-becomes-a-threat-11621596885?mod=home-page\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".DJI":"道琼斯",".IXIC":"NASDAQ Composite","TROW":"普信集团","JNK":"债券指数ETF-SPDR Barclays高收益债",".SPX":"S&P 500 Index","F":"福特汽车","HYG":"债券指数ETF-iShares iBoxx高收益公司债"},"source_url":"https://www.marketwatch.com/story/this-high-yield-strategy-may-be-best-for-income-as-inflation-becomes-a-threat-11621596885?mod=home-page","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"2137909732","content_text":"Kevin Loome of T. Rowe Price highlights the advantages of junk bonds in a growing economy with rising inflation.Ford Motor Credit is one of the larger issuers of high-yield bonds held by the T. Rowe Price U.S. High Yield Fund. (Bloomberg)High-yield bonds, also known as junk bonds, have been a popular class of investments in a yield-starved world.But interest rates are still low, while inflation has been picking up, as the economy bounces back from its coronavirus swoon in 2020.This means income-seekers might be afraid of a decline in bond prices as interest rates rise.Kevin Loome of T. Rowe Price $(TROW)$ makes the case that in a growing economy with inflation, high-yield bond portfolios can have advantages over investment-grade portfolios.Loome is the portfolio manager for the T. Rowe Price U.S. High Yield Fund. He joined T. Rowe Price in 2017 as part of the firm's acquisition of the Henderson High Yield Opportunities Fund, which was originally established in May 2013. He is based in Philadelphia.Fund outperformanceThe T. Rowe Price U.S. High Yield Fund's institutional shares are rated five stars by Morningstar. That's the investment research firm's highest rating. The fund's Investor share class and Advisor share class have four-star ratings.Here are total returns (with dividends reinvested) through May 14 for all three classes for the fund against its benchmark, the ICE BofA High Yield Constrained Index, and two large exchange-traded funds -- the SPDR Bloomberg Barclays High Yield Bond ETF $(JNK)$ and the iShares iBoxx $ High Yield Corporate Bond ETF $(HYG.UK)$, which are both rated three stars by Morningstar.The T. Rowe Price U.S. High Yield Fund's institutional shares have a 30-day SEC yield of 4.49% and a 30-day annualized dividend yield of 5.40%. For the Investor shares (TUHYX) the 30-day SEC yield is 4.34% and the 30-day annualized yield is 5.26%. For the Advisor shares, the 30-day SEC yield is 4.20% and the 30-day annualized yield is 5.08%.For five years, the T. Rowe Price U.S. High Yield Fund's three share classes rank in the 11th percentile or higher in Morningstar's \"U.S. Fund High Yield Bond\" category. From the fund's inception as the Henderson High Yield Opportunities Fund (May 2013), the three share classes rank in the third percentile or higher.Concentrated portfolioDuring an interview, Loome said his fund has advantages over its benchmark index and against the above ETFs because its size enables it to run a more selective or concentrated portfolio.The T. Rowe Price U.S. High Yield Fund has about $500 million in assets, although the total assets under management at T. Rowe Price under the same strategy managed by Loome is about $2.5 billion. That compares to an overall high-yield bond market of $1.5 trillion tracked by the ICE BofA High Yield Constrained Index. The SPDR Bloomberg Barclays High Yield Bond ETF has $10.3 in assets and the ishares iBoxx $ High Yield Corporate Bond ETF has $21.2 billion.Loome said his portfolio is holding bonds issued by about 100 companies, and that its limit is 200 companies, but that \"the average mutual-fund manager in this space owns about 450.\"Loome also invests in leveraged loans, which are non-investment-grade commercial loans. Among the fund's top holdings are bonds issued by Ford Motor Credit (a subsidiary of Ford Motor Co. $(F)$), Occidental Petroleum Corp. $(OXY)$ and American Airlines Group Inc. $(AAL)$.A high-yield bond fund is a play not only on more income than you can get from investment-grade bonds, but on credit risk. Higher default rates mean more opportunities to scoop up bonds at discounted prices, leading to gains when the bonds mature, provided the fund manager has gotten the credit analysis right.Lower-rated or unrated issuers' bonds will trade at significant discounts during times of market turmoil, as they did early in the coronavirus pandemic last year. Then as interest rates plunged and asset values recovered, the junk bond market values followed suit, explaining the high double-digit returns for 2020.But in a universe of about 1,000 high-yield issuers, \"If you are holding 600 of 1,000, you cannot argue that you are adding credit selection,\" Loome said.So 2020 was an example of a year in which high-yield bond-fund mangers had \"a total return plus yield opportunity,\" Loomis said. In the current environment, with prices having recovered, \"the best you can have is an income opportunity,\" he said. But there are also price advantages for junk bonds in the current economic climate.Advantages in a rising-rate environmentWe're in the midst of a pullback for U.S. stocks, which may reflect investors' fears of inflation, in the wake of a massive increase in the money supply from Federal Reserve bond purchases and the federal government's stimulus. Consumer prices in the U.S. have risen 4.2% over the past year -- the largest increase since 2008.Short-term interest rates remain near zero because the Fed's target range for the federal funds rate is zero to 0.25%. But that may change if the Federal Open Market Committee believes inflation is likely to remain above its 2% long-term target. Meanwhile, the market has already reacted with a bond selloff that has pushed long-term yields higher. The yield on 10-year U.S. Treasury notes has increased to 1.65% from 0.93% at the end of last year.Investors holding shares of bond funds will be nervous as interest rates rise because bond market values -- and the funds' share prices -- will go down.\"When you look at the availability of fixed income and where interest rates are, the least-worst place to be is leveraged loans and high yield (bonds), because they have shorter term structures and the highest coupons,\" Loome said.Why would junk bonds and non-investment-grade commercial loans be the best fixed-income space in a rising-rate environment? There are three reasons:So a high-yield bond fund enjoys the advantages of an improving economy, because it means defaults are less likely. It enjoys pricing advantages, especially if its duration is very low, because the portfolio will turn over more quickly with freed-up money being invested in new bonds paying more.","news_type":1},"isVote":1,"tweetType":1,"viewCount":147,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":4,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}