Rida Morwa | Jan 23, 2016 06:15PM ET
Summary
Situation in the High-Yield Bond Sector
Sentiment towards high-yield debt has deteriorated this month after sliding for much of last year. The market has been unable to escape this month's pronounced decline for equities and oil dropping below $30 a barrel. Popular high-yield junk bond ETFs have fallen to lowest since 1967 . Stricter mortgage loan regulations adopted by banks after the last financial crisis have contributed to financial stability. Large banks have largely pulled back from mortgage lending to those with weak credit histories.
5- Aggressive Quantitative Easing (QE) across the World
With Europe, Japan, and China all facing deflation and lower growth, they are all likely to increase their continued aggressive Quantitative Easing (QE), by further easing money supply and lowering interest rates. This will keep supporting demand for high yield products, including dividend stocks and Junk Bonds. Furthermore since October 2014 . Unattractive Treasury yields returns will keep demand for high-yield products strong, especially for income-hungry investors, baby boomers, and retirees.
Five Criteria to keep in mind when looking to invest in "high-yield" Junk Bond Closed-End Funds (CEFs)
Closed-End Funds (CEFs) currently offer one of the best way to enter the Junk Bond sector, as discount to Net Asset Value (NAV) is running high, thus providing some of the highest dividend yields. The following is a small list of such CEFs with their corresponding yield and discount to Net Asset Value:
Naturally, not all the Junk Bond space is safe. If an investor is looking to invest in high yield today, I would suggest looking for a
Closed-End Fund with the following 5 criteria in mind:
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