Ravi Chintapalli, Client Portfolio Manager on the Global Fixed Income team at Nuveen, says that the bond market has seen a structural change in the market for below-investment grade or junk bonds. Chintapalli says investors think of junk bonds as it was in times like 2007, when nearly one-third of the paper was teetering on the edge of default; today, however, only 10 percent of the below-investment grade paper carries those same low ratings, and default risk is much lower than in the past. As a result, investors can expect high-yield bonds to live up to their promise, with 7 percent income levels moving forward, and some extra risk cushion in the many cases where the bonds are selling below par.
