High Yield Corporate Bonds
Also commonly known as “junk bonds”, high yield corporate bonds represent lower rated companies that generally have higher returns and higher risk.
Bond rating firms classify the ability of a company to pay back its debt using letter grades. High yield bonds are typically rated below BBB. These companies may have high returns, but the ratings company feels they are also a higher risk to default and pay nothing at all.
High yield bonds can be purchased in many different maturities, but the funds on this site focus on intermediate bonds with an average maturity of 5-10 years.
- 1970-1972: Longinvest’s bond fund spreadsheet (10-2 model), R*
- 1973-1978: Barclays US Corporate Investment Grade TR USD, R*
- 1979+: Vanguard High Yield Corporate Fund (VWEHX), P
(*) Good High Yield Corporate data is not available prior to 1979. In previous years, I use two different replacement assets. The first priority is high grade corporate which is not the same as high yield but still represents the corporate market. The second priority is an intermediate treasury model, which does not contain corporate bonds but at least models the correct maturity. Each replacement has a different error, and both are accounted for in the verification calculations.
Portfolios with High Yield Corporate assets