04-03-2021, 02:31 PM
High Yield when they are Low Yield
<!-- SC_OFF --><div class="md"><p>Using data sources from FRED, the US High Yield Effective yield (EY) is below 5%. This is new territory.</p> <p>Looking at the EY average for the end of each week, Pre-pandemic, there are 155 weeks in total where the EY traded below 6%. I decided to see what the subsequent 12-month total return (TR) was when yields were this low. Here are those findings:</p> <ul> <li>Average TR 3.1%</li> <li>Median TR 2.8%</li> <li>Largest positive TR 8.1% (03/06/2020-03/06/2021)</li> <li>Largest negative TR -3.6% (08/29/2014-08/29/2025)</li> <li>Number of positive returns 132 weeks</li> <li>Number of negative or zero returns 23 weeks</li> </ul> <p>A few bits I find interesting, yet not surprising, is that the best TR period with historically low yields came during a period of high volatility (COVID) while the worst TR period came from a period of a relatively long period grinding-ly low yields.</p> <p>Surprisingly, the number of weeks with a positive TR vs negative or zero TR is a ratio of 5.74:1, not something I would have expected. Then again, in the grand scheme of things, sub-6% EY is itself new territory. </p> <p>In the end, the average and median returns are quite meager and it’s likely that the subsequent 12-month return in this space, from 2021 Q1, will fall below these numbers barring some short lived period of high volatility with a recovery, e.g. COVID-19 like period.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/NegativeTangibleBook"> /u/NegativeTangibleBook </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/mj90ot/high_yield_when_they_are_low_yield/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/mj90ot/high_yield_when_they_are_low_yield/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>Using data sources from FRED, the US High Yield Effective yield (EY) is below 5%. This is new territory.</p> <p>Looking at the EY average for the end of each week, Pre-pandemic, there are 155 weeks in total where the EY traded below 6%. I decided to see what the subsequent 12-month total return (TR) was when yields were this low. Here are those findings:</p> <ul> <li>Average TR 3.1%</li> <li>Median TR 2.8%</li> <li>Largest positive TR 8.1% (03/06/2020-03/06/2021)</li> <li>Largest negative TR -3.6% (08/29/2014-08/29/2025)</li> <li>Number of positive returns 132 weeks</li> <li>Number of negative or zero returns 23 weeks</li> </ul> <p>A few bits I find interesting, yet not surprising, is that the best TR period with historically low yields came during a period of high volatility (COVID) while the worst TR period came from a period of a relatively long period grinding-ly low yields.</p> <p>Surprisingly, the number of weeks with a positive TR vs negative or zero TR is a ratio of 5.74:1, not something I would have expected. Then again, in the grand scheme of things, sub-6% EY is itself new territory. </p> <p>In the end, the average and median returns are quite meager and it’s likely that the subsequent 12-month return in this space, from 2021 Q1, will fall below these numbers barring some short lived period of high volatility with a recovery, e.g. COVID-19 like period.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/NegativeTangibleBook"> /u/NegativeTangibleBook </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/mj90ot/high_yield_when_they_are_low_yield/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/mj90ot/high_yield_when_they_are_low_yield/">[comments]</a></span>Kind Regards R