While large cap U.S. stocks have fallen over 17% for the year-to-date period through February 23, below-investment-grade bonds have risen close to 4%. Following record losses of 26% in 2008, the bonds' yields of close to 18% have attracted some investors' attention.
In their recent review of high-yield bonds, Fidelity Investments noted that their yields suggest that investors have already priced in the probability of record-high default rates. While defaults would pummel the bonds' values, their current yields "offer a significant cushion against heightened risks," according to Fidelity. Click here for their report.