We estimate that the high yield risk premium would then drop to 439 basis points, reflecting prevailing levels of defaults, economic indicators, and credit availability.
Tax efficiency, expense ratios, yield and risk all should be considered when evaluating a fund.
The lower average rating and longer maturity range of the Vanguard index give the fund a higher yield, risk and volatility.
Higher yield means higher risk and right now, Italy is a riskier bet than Brazil.
Moreover, because the effects are small, slight differences in the testing methodology can yield completely different risk results.
The remaining spread of the mortgage rate over the Treasury yield represents the risk of prepayment and underwriting costs.
Buyers of these REITs are trading a higher yield for increased risk, and many were taught a painful lesson last week.
With a little effort, I was able to produce a portfolio that generates a higher yield with lower risk and higher returns.
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As default risk is the primary driver of high-yield corporate bond prices, as opposed to interest rate direction, when the economy expands, the risk of high-yield corporate bonds defaulting is reduced and this is reflected in lower volatility.
To capitalize this entrepreneurial approach, the banks should be able to sell these higher-yield, lower-risk mortgages to be bundled into bonds that investors would find attractive because of the premium yield, stable revenue stream, and equity kicker.
If anything, the risk neutral yield on the bond will be greater than warranted by the actual riskiness of the bond, due to market risk aversion.
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That will drive down interest rates and force investors into higher risk for yield and growth.
An investor with a bigger appetite for risk and yield would buy this first slice.
Diversification, attention to debt levels, and being aware of the risks in each individual stock will help build a portfolio that pays an above-average dividend yield but also mitigates risk.
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In stepped the investment bank industry with another solution: We'll take your mortgages, securitize them, slice them into categories based on default risk, use computer models to match default risk with yield and sell them to buyers around the world.
The use of the Fed to peg nominal interest rates at artificially low levels, fine tune the yield curve, incentivize risk taking, monetize government debt, and inflate selected asset prices by allocating credit are deviations from sound money and free markets.
There is, for a start, the risk that the yield on Treasuries rises, perhaps sharply.
The consistency of the cash flows and ample coverage allows investors to collect a very attractive risk-adjusted yield.
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The notion that owning high-risk stocks will yield high returns over the long haul is a bedrock of modern finance.
Bond traders are showing signs of increased risk aversion as yield spreads have widened and debt is harder to finance for some companies.
The conclusion seems to be that investors are not being paid well at present to take the incremental risk of high yield bonds over Treasuries.
They ought to demand extra yield as compensation for the risk.
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Investment-grade corporate bonds, which carry only a sliver of default risk, now yield an average 1.8 percentage points more than Treasurys, up from 1.3 points in early 2000.
For example, we could increase the duration of our investment portfolio, we could go out and buy a lot of securities that have good short-term yield but have higher credit risk.
So it gives you a little bit more yield without taking on too much risk.
So much for the idea of a flattening yield curve bringing investors to the risk table.
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Investors are happy to take the extra yield today and worry about the risk later.
These will receive a handsome yield in return for underwriting the risk of cancellation.
But having optimal liquidity with little risk even with no yield is looking more and more like a bargain.
Exactly who will buy these bonds is unclear since Brazilian investors can get a comparable yield without taking on so much risk.
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