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Yahoo
14-06-2025
- Business
- Yahoo
5 best high-yield bond funds
High-yield bonds offer the potential for investors to earn higher returns if they're comfortable taking on additional credit risk. High-yield bonds are issued by entities with low credit ratings from bond rating agencies such as Moody's, Standard & Poor's and Fitch. Bonds with ratings below a certain threshold are considered non-investment grade, or high-yield. High-yield bonds are also referred to as junk bonds because of their lower credit quality, which means the bond's issuer is more likely to default. Because of the additional risk associated with high-yield bonds, investors can expect to earn higher returns compared to safer bonds. Yields for these non-investment-grade bonds are higher than government bonds, meaning investors can earn more in income relative to the price they paid for the bonds. Mutual funds and ETFs are some of the easiest ways to get exposure to high-yield bonds, offering you a portfolio with hundreds or thousands of them. Here's what else you should know about high-yield bonds and some of the top funds to consider for your portfolio. (Yield data below from Morningstar as of June 11, 2025.) The Vanguard High-Yield Corporate Fund invests in medium- and lower-quality corporate bonds. The fund managers invest in what they consider to be higher-rated junk bonds. The fund holds around 900 different bonds. Yield: 6.2 percent Expense ratio: 0.22 percent Fund assets: $24.6 billion This iShares ETF is one of the most popular high-yield bond ETFs and aims to track the investment performance of an index made up of U.S. high-yield corporate bonds. The fund held more than 1,200 bonds as of June 2025 with a weighted average maturity of about five years. Yield: 5.8 percent Expense ratio: 0.49 percent Fund assets: $16.4 billion This JPMorgan ETF seeks to replicate the investment performance of an index of U.S. high-yield corporate bonds. The fund held about 1,500 bonds as of June 2025. Yield: 7.8 percent Expense ratio: 0.07 percent Fund assets: $446.6 million The SPDR Portfolio High Yield Bond ETF aims to closely match the investment performance of a high-yield bond index that includes U.S. high-yield bonds with at least one year to maturity and a minimum amount outstanding of $250 million, among other factors. Yield: 7.7 percent Expense ratio: 0.05 percent Fund assets: $8.5 billion The VanEck High Yield Muni ETF seeks to match the investment performance of an index that tracks the U.S. high-yield long-term tax-exempt bond market. The bonds in this fund are generally exempt from federal income taxes, which is why the stated yield is lower than the yields on taxable funds. Yield: 4.4 percent Expense ratio: 0.32 percent Fund assets: $3.3 billion *Note: To compare municipal bond funds with taxable funds, investors calculate a taxable equivalent yield, which can be determined by dividing the municipal yield by (1-tax rate). MORE: Best short-term investments High-yield bond funds can be bought at almost any online brokerage, but some brokers may have a wider offering. Bond ETFs will generally be available at any of the best online brokers. So, if you're looking to invest in one, you're likely to find what you're looking for at a top broker. But the situation differs for mutual funds. Since not all mutual funds are offered at all brokers, it can make sense to see if a potential broker offers the mutual fund you're looking for. Start with the best brokers for mutual funds to see who has access to the bond fund you want to buy. Keep in mind that high-yield bond investors may suffer during economic downturns or recessions as more issuers default because they can't make their interest payments. Yields may widen, sending bond prices lower as investors look for additional return to compensate them for the higher risk. Because of their extra risks, high-yield bonds are not typically considered one of the best investments, though they may generate attractive returns. Get matched: Find a financial advisor who can help you maximize your investments High-yield bonds can be a way to boost your portfolio's returns, but should only be included in an already diversified portfolio. While bonds are less volatile than stocks, high-yield bonds can behave more like stocks because of the additional risk they carry. You'll want to make sure that the additional return available in high-yield bonds adequately compensates you for the higher risk compared to higher-rated bonds. Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Herald Sun
04-06-2025
- Business
- Herald Sun
What a downgraded credit rating would mean for Victoria
Victoria has been repeatedly warned its credit rating is at risk of a further downgrade amid a ballooning debt pile on track to hit $194bn. Treasurer Jaclyn Symes flew to New York on Wednesday to meet with the heads of major ratings agencies to defend the state's AA rating — already the lowest in the nation. But what is a credit rating and, more importantly, what does it mean for you and me if it is again downgraded. What is a credit rating? A credit rating assesses the creditworthiness of a borrower, such as the Victorian government or a company. This credit grade is expressed as a letter. The three main ratings agencies, Standard & Poor's, Moody's and Fitch, operate a scale running from AAA — the highest grade dubbed 'prime' — all the way down to C for Standard & Poor's and Moody's, and D for Fitch. The grade indicates a borrower's ability to repay debt and helps investors evaluate the risk of lending money to a government — by buying bonds which show up as government debt — or a company. What is Victoria's current rating? Victoria holds a AA rating from Standard & Poor's. It was downgraded by two notches from AAA in December 2020, falling to AA+ and then AA, in December 2020 due to ballooning debt. Moody's stripped Victoria of its AAA status in February 2021, before downgrading it from AA1 to AA2 in 2022. The state holds a AA+ from Fitch. None of these rating are prime but are 'high grade' and represent a 'stable outlook'. That said, Victoria's credit rating is lower than any other state in the nation. Why does the rating matter? Credit ratings affect the government's borrowing costs — governments with a AAA rating can issue bonds with the lowest interest rate possible. As a rating falls, the interest payments investors will demand in order to buy Victorian bonds rise as the bonds are viewed as being of higher risk. Those interest payments are an expense to the Victorian government and paid by every taxpayer. So a lower credit rating means a higher interest expense bill on the state's debt for Victorian taxpayers. What does it mean if it falls below a certain rating? Another downgrade would be a massive hit to the Victorian government. Victoria's net debt is tracking to weigh in at $194b by 2028-29, during which the state will be spending close to 10c of every dollar in taxation revenue on servicing it. The government can ill afford to be paying more on its debt, especially as it looks to raise funds to plough into its Big Build agenda and its signature pet project, the $34.5b Suburban Rail Loop. A further downgrade would heap pressure on Victoria's ability to finance major projects, a well as on the government to maintain services. What have the credit rating agencies said? The two main rating agencies have both warned the Allan-government over the handling of the state's finances. Standard & Poor's has said: 'Reining in growth in public spending, including the government's wages bill, and achieving promised operating savings are key to strengthening the financial outcomes. 'However, these goals have proven to be difficult to achieve in recent years. Fiscal discipline is important, especially in the lead-up to the 2026 state election, because we have seen many Australian state governments lose control of their budget in the lead-up to an election.' Moody's has said: 'Should the risks materialise, or reform momentum weakens, or both, the potential for higher-than-expected debt and interest burdens would further weigh on Victoria's credit profile.' What has the government said? Treasurer Jaclyn Symes has defended the state's finances, arguing the 'major credit rating agencies continue to project a stable outlook for Victoria's credit rating'. 'Those that want to talk down the state will choose to do so,' she has said. 'I will continue to talk up the Victorian economy.' On Tuesday it emerged Victorian treasury officials have done no modelling on the impact of a credit downgrade on the state's economy. 'The five step fiscal strategy is aimed at retaining the current credit rating and improving it over time,' Department of Treasury and Finance secretary Chris Barrett told a Public Accounts and Estimates Committee hearing.
30-05-2025
- Business
Maryland's Wes Moore says he's not running for president but high-profile stops keep chatter alive
ANNAPOLIS, Md. -- Maryland Gov. Wes Moore, often mentioned among Democrats as a potential presidential candidate, has been saying for months that he isn't running for the White House in 2028. That hasn't stopped persistent talk about his future political plans, especially when he continues to make appearances outside Maryland that raise his national profile. On Friday, he's traveling to speak at the Blue Palmetto Dinner in the early presidential primary state of South Carolina. When asked about 2028, though, the governor is clear. 'I'm not running,' Moore told The Associated Press in an interview Wednesday. He also said, when asked, that he isn't trying to get his name in the conversation for a potential vice presidential candidacy, either. The trip to South Carolina includes meetings with business prospects, Moore said. 'And people should get very used to me going all over the country bringing business back to Maryland, because that's exactly what I plan on doing as long as I'm the governor of the state,' Moore said after a dedication in Annapolis for a memorial to former Rep. Parren Mitchell, the state's first Black congressman. In the third year of his first term, Moore plans to run for reelection next year in heavily Democratic Maryland. He says being the state's governor during a challenging time has his full attention. That includes working to navigate the difficulties of dramatic federal downsizing under the Trump administration, which poses an outsized economic impact on Maryland. The state is home to a large number of federal workers toiling in the shadow of the nation's capital — about 256,000 Marylanders received a federal W-2 in 2021, representing about 8% of taxpayers, according to an analysis by the state's comptroller. Earlier this month, Maryland lost its triple-A bond rating from the Moody's economic rating agency. State officials had cited the rating for more than 50 years as a sign of strong fiscal stewardship that enabled the state to pay the lowest rates when it sells bonds to pay for infrastructure. Two other rating agencies, Standard & Poor's and Fitch, have recently affirmed the state's triple-A bond rating. Moore and other leading Democrats in the state blamed the Trump administration's downsizing for the Moody's downgrade. The governor just had the most challenging legislative session of his tenure. Facing a $3.3 billion budget deficit, he worked with the legislature, which is controlled by Democrats, to reach a balanced budget that included about $2 billion in spending cuts throughout state government and about $1.6 billion in new revenues through tax and fee increases. Most of the tax increases were imposed on high-income residents, including two new higher tax brackets for people who make more than $500,000 and a new 2% tax on capital gains for people with income over $350,000. The governor has said most Marylanders won't see a tax increase, and some will receive a modest tax cut. Still, Maryland Republicans have been pouncing on the tax increases — an issue sure to be raised often by the GOP's next nominee for governor. Moore, 46, is the state's first Black governor, and the only Black governor currently serving. He is the former CEO of the Robin Hood Foundation, an anti-poverty nonprofit. He also is a Rhodes scholar and a combat veteran who served in Afghanistan. The buzz around Moore has persisted since the bestselling author won Maryland's governorship in his first bid for public office in a landslide in 2022, after prevailing in a crowded Democratic primary that included former national party chairman and former U.S. Labor Secretary Tom Perez. In a state that is about 30% Black, Moore was recently criticized by the state's Legislative Black Caucus for vetoing a bill to study potential reparations for slavery. Moore said the idea has been studied enough and now is the time to 'focus on the work itself' of building a better economy for all. That includes narrowing the racial wealth gap, expanding homeownership, uplifting entrepreneurs of color and closing the foundational disparities that lead to inequality — from food insecurity to education. Democrats outnumber Republicans 2-1 in Maryland, making the state largely safe for Democratic incumbents. Still, former Republican Gov. Larry Hogan won the first of his two terms by campaigning heavily against tax increases approved during the tenure of his Democratic predecessor, prompting some to wonder if the popular Hogan might run for governor again. Maryland limits a governor to two consecutive terms, but a former two-term governor could seek another term after sitting out one.
Boston Globe
30-05-2025
- Business
- Boston Globe
Maryland's Wes Moore says he's not running for president but high-profile stops keep chatter alive
'I'm not running,' Moore told The Associated Press in an interview Wednesday. He also said, when asked, that he isn't trying to get his name in the conversation for a potential vice presidential candidacy, either. The trip to South Carolina includes meetings with business prospects, Moore said. Advertisement 'And people should get very used to me going all over the country bringing business back to Maryland, because that's exactly what I plan on doing as long as I'm the governor of the state,' Moore said after a dedication in Annapolis for a memorial to former Rep. Parren Mitchell, the state's first Black congressman. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up In the third year of his first term, Moore plans to run for reelection next year in heavily Democratic Maryland. He says being the state's governor during a challenging time has his full attention. That includes working to navigate the difficulties of dramatic federal downsizing under the Trump administration, which poses an outsized economic impact on Maryland. The state is home to a large number of federal workers toiling in the shadow of the nation's capital — about 256,000 Marylanders received a federal W-2 in 2021, representing about 8% of taxpayers, according to an analysis by the state's comptroller. Advertisement Earlier this month, Maryland lost its triple-A bond rating from the Moody's economic rating agency. State officials had cited the rating for more than 50 years as a sign of strong fiscal stewardship that enabled the state to pay the lowest rates when it sells bonds to pay for infrastructure. Two other rating agencies, Standard & Poor's and Fitch, have recently affirmed the state's triple-A bond rating. Moore and other leading Democrats in the state blamed the Trump administration's downsizing for the Moody's downgrade. The governor just had the most challenging legislative session of his tenure. Facing a $3.3 billion budget deficit, he worked with the legislature, which is controlled by Democrats, to reach a balanced budget that included about $2 billion in spending cuts throughout state government and about $1.6 billion in new revenues through tax and fee increases. Most of the tax increases were imposed on high-income residents, including two new higher tax brackets for people who make more than $500,000 and a new 2% tax on capital gains for people with income over $350,000. The governor has said most Marylanders won't see a tax increase, and some will receive a modest tax cut. Still, Maryland Republicans have been pouncing on the tax increases — an issue sure to be raised often by the GOP's next nominee for governor. Moore, 46, is the state's first Black governor, and the only Black governor currently serving. He is the former CEO of the Robin Hood Foundation, an anti-poverty nonprofit. He also is a Rhodes scholar and a combat veteran who served in Afghanistan. Advertisement The buzz around Moore has persisted since the bestselling author won Maryland's governorship in his first bid for public office in a landslide in 2022, after prevailing in a crowded Democratic primary that included former national party chairman and former U.S. Labor Secretary Tom Perez. In a state that is about 30% Black, Moore was recently criticized by the state's Legislative Black Caucus for vetoing a bill to study potential reparations for slavery. Moore said the idea has been studied enough and now is the time to 'focus on the work itself' of building a better economy for all. That includes narrowing the racial wealth gap, expanding homeownership, uplifting entrepreneurs of color and closing the foundational disparities that lead to inequality — from food insecurity to education. Democrats outnumber Republicans 2-1 in Maryland, making the state largely safe for Democratic incumbents. Still, former Republican Gov. Larry Hogan won the first of his two terms by campaigning heavily against tax increases approved during the tenure of his Democratic predecessor, prompting some to wonder if the popular Hogan might run for governor again. Maryland limits a governor to two consecutive terms, but a former two-term governor could seek another term after sitting out one.
The Print
23-05-2025
- Business
- The Print
Moody's US credit rating downgrade may usher in a new era—waning investor interest in US govt bonds
The downgrade has pushed 10-year treasury yields closer to 4.5 percent and 30-year yields near 5 percent, reflecting heightened investor risk perception. The downgrade signals that the era in which the US could borrow unlimited amounts without experiencing higher interest costs and inflation, may be beginning to change. This is for the first time in over a century that the world's largest and most liquid bond market does not have the Aaa rating. While this may not have an immediate impact, investors will evaluate their appetite and confidence in US government bonds. Last week, Moody's Ratings downgraded the rating of the United States government to Aa1 from Aaa, citing concerns about its inability to arrest the growing pile of debt. With this downgrade, Moody's joined Standard & Poor's and Fitch Ratings in placing the US one notch below the top grade. S&P had downgraded the US back in 2011, while Fitch did so in 2023. Decline in fiscal metrics Moody's highlighted persistently large fiscal deficits in driving the US government's debt and interest burden as the prime justification for the ratings downgrade. Over the past decade, the US government's fiscal metrics have deteriorated considerably. While federal spending has increased, tax cuts have reduced government revenue. As an outcome, deficits and debt have grown, and interest payments on government debt have shown a sharp increase. The decline in revenue is mainly on account of the Tax Cuts and Jobs Act, signed into law in December 2017 during Donald Trump's first term as president. The Act lowered most individual income tax rates, reducing the top marginal rate from 39.6 percent to 37 percent, and adjusted income thresholds for all brackets. The provisions of the Act lowered the corporate income tax rate from 35 percent to 21 percent. Most individual income tax provisions are set to expire on 31 December, 2025. Moody's opines that if the provisions of the Act are extended beyond 2025, it will add USD 4 trillion to the primary federal deficit. The federal fiscal deficit will rise to nearly 9 percent of the gross domestic product by 2035, up from the current levels of 7.6 percent, due to increased interest payments on debt, and relatively low revenue generation. Further, the debt burden is expected to rise to about 134 percent of GDP by 2035 from the present levels of 124 percent. Notably, the US debt affordability, expressed as the ratio of interest payments to revenues, is facing challenges due to rising interest payments and increasing debt burden. Despite demand, US treasury yields have seen an increase since 2021. While higher debt and deficits have led to higher interest payments and costs, the current administration's policy towards tariffs will exacerbate the situation by putting pressure on prices and making it difficult for the Federal Reserve to cut rates, driving up borrowing costs. Also Read: UK FTA is good news for India amid global turbulence. Domestic reforms must follow market access Previous instances of ratings downgrade The previous two instances of downgrade followed political standoff in US Congress over raising the federal debt ceiling, with significant disagreement between Republicans and Democrats on how to address fiscal challenges. While Republicans reject tax increases, Democrats are reluctant towards spending cuts. The downgrades were also in response to the failure of successive administrations to reverse the trends of large deficits and growing interest costs. The 2011 downgrade by S&P did not trigger a spike in US treasury securities. In fact, it led to a sharp rally in US bonds due to the flight-to-safety effect. But the 2023 credit rating downgrade by Fitch reflected deepening concerns over rising debt and long-term fiscal challenges. While the immediate market impact was limited, the 2023 downgrade signaled to global investors that the US government's financial management and political stability were under increasing scrutiny. The recent Moody's downgrade has further reiterated concerns over the government's fiscal challenges. Previous episodes of downgrade led to dollar strengthening, while emerging market currencies weakened. This time, the dollar could weaken, given the concerns on fiscal sustainability. Since 21 January, 2025, the US Treasury has been employing extraordinary measures to ensure that the government does not hit the USD 36.1 trillion debt ceiling. According to the Treasury's assessments, the extraordinary measures can last till August. Before reaching the August 'X' date, policymakers will need to agree to either raise or suspend the debt ceiling to avoid a default. The passing of Trump's new tax bill or higher borrowings could upend the calculations of the 'X date', and further complicate the task of fiscal management. Impact on emerging markets Emerging markets, including India, may face FPI withdrawals, if US yields rise sharply. The yield difference between US and Indian government bonds has been narrowing, and is expected to shrink more after the Moody's downgrade. The differential could narrow further, given that the Reserve Bank of India is widely expected to cut rates due to benign inflation. Thus, the rating downgrade and the US policy preference towards higher tariffs would subject emerging markets to bouts of volatile capital flows. Emerging markets reliant on international debt markets may see higher borrowing costs as risk premiums rise. Countries already struggling with high debt-GDP ratios may face steeper yields on the new issuances. Radhika Pandey is associate professor and Madhur Mehta is a research fellow at the National Institute of Public Finance and Policy. Views are personal. Also Read: Waning trust in US dollar has spurred a rally in Asian currencies. Central banks may have to step in
