Are these investors holding a large portion of the of outstanding high yield debt or a small portion?
Some investors perceive that emerging markets debt is inexpensive because they are comparing it with high yield corporate debt.
The sheer volume of high-yield debt is causing spreads over Treasuries to soar.
Indeed, a recent report from Deutsche Bank shows that even investors in risky high-yield debt have had five great years.
At Fidelity, Mr. Young says that among global markets, the U.S. looks the most attractive, particularly stocks and high-yield debt such as leveraged loans.
The high-yield debt market, which helped finance a wave of leveraged buy-outs in the 1980s (see article), is back, fuelled by investor appetite for yield.
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Even if radio advertising moves down from a 10% growth rate to 5%, and it gets difficult to refinance some tranches of high-yield debt, the stocks are buys.
So we will see asset classes that will have very good runs (commodities, high-yield debt, currencies like the New Zealand dollar) only to lose a good deal of those gains in a short period.
Now, high-yield debt does not mean necessarily putting money with a rinky-dink company stuck in Backwater, USA. Some higher-profile companies exist in that spectrum, like Ford Motor, Sprint Nextel, United States Steel and Chesapeake Energy.
Guy told me that the demand for high-yield debt is a function of the improving economy, declining returns for the debt market, and the fact that the weakest issuers were effectively shaken out by the last recession.
So many firms are refinancing that the point at which there is likely to be a potentially worrying spike in high-yield debt falling due has receded from next year to 2012, says Martin Fridson of Fridson Advisers.
You want high yield corporate debt?
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Another bull on high-yield bond funds is Jack Bowers of Fidelity Monitor, who is recommending Fidelity Strategic Income (nasdaq: FSICX - news - people ), which has 40% in high-yield debt, tempered by 60% in foreign and U.S. investment grade and government issues.
Rogge thinks investment-grade and high-yield corporate debt, for example, are attractively priced for a difficult environment.
This year, an index of Asian high- yield corporate debt from J.
The resurrection in stocks since March of 2009 corresponded with a momentous junk-bond rally, too, prompting investors take a more skeptical view of high-yield corporate debt.
As of its last public disclosure on this score, it had a modest 16% allocation to fixed income, consisting of 7% in inflation-indexed bonds, 4% in corporates and the rest in high-yield and foreign debt.
He prefers high yield dollar denominated Brazilian corporate debt.
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At this point, fixed interest rates, even for high yield (junk-rated) debt, are near historic lows.
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U.S. investors are jumping back into Asian bonds, even buying debt from high-yield Chinese real-estate developers they shunned last year because of worries the companies could default.
Other options might be high-yield bonds, floating-rate debt, cash, commodities, or real-estate income producing properties.
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The other requirement for steady performance is that the credit markets remain open, enabling high-yield companies to roll over maturing debt.
Nevertheless, Fidelity has been "substantially" adding emerging-market debt, especially Asian high-yield securities, to its holdings over the past 12 months.
Investors need the local currency debt exposure to get the high yield.
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Beyond pushing out debt maturities last year, high yield borrowers in 2012 saw a decline in their interest rates as demand for their bonds rose.
Outside of the precious metals, high-yield corporate and local currency emerging market debt are another trade favorite that has legs even if the equity markets turn positive.
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Instead, these investments would rely more heavily on active management--things like emerging market equity and debt funds, domestic high-yield bonds, small cap equities, real estate and private equity.
Originally created to finance debt-heavy acquistions, high-yield bonds are now popular with investors looking for yield.
High yield corporate debentures need scrutiny as to EBITDA coverage of the underlying debt.
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