Dividend-News

Weekly Review: High-Yield CEFs - The Market Participants Were Interested In Higher Yields

Published Wed, 23 Oct 2019 16:22:33 -0400 on Seeking Alpha

Introduction
The closed-end funds from the high-yield sector significantly increased their prices over the past months. Currently, most of them are traded at positive Z-scores, which is an indication that they have lost most of their statistical edge. Still, they are traded at high discounts, but we are cautious when we select our positions due to the lack of statistical edge. For me, personally, I am in a waiting mode to see a statistical opportunity to review some of the funds.
The Benchmark
After the important trade meeting between the U.S and China, the stock market and the high-yield bonds reported a positive week. The investors are again interested in the riskier assets and the idea to include higher yielders to their portfolios as the market environment seems normalized.
Over the past week, the main benchmark iShares iBoxx $ High Yield Corporate Bond ETF (HYG), which we use to track the high-yield bonds, reported an increase of $0.32 per share and finished the Friday session at $87.09 per share.

Source: Barchart, iBoxx $ High Yield Corp Bond iShares
Statistical Comparison And Spread Review Of The Sector
High-yield bonds are typically evaluated on the difference between their yield and the yield on the U.S. Treasury bond. High-yield spreads are used by investors and market analysts to evaluate the overall credit markets. Higher spreads indicate a higher default risk in junk bonds and can be a reflection of the overall corporate economy and/or a... Read more