S&P: High-Yield Bond Funds Up 2.3% in Q3

October 8, 2003 (PLANSPONSOR.com) - The third quarter was good for high-yield bond funds, returning 2.3%, helping to pad 2003's 16.9% return through September.

The ride over the past three months was like a roller coaster however.   After falling 1.1% in July, the average high-yield bond fund then rebounded to return 1.2% in August and 2.1% in September, according to Standard & Poor’s.

“High-yield bonds have been benefiting from low interest rates, which have made their higher interest payments look good relative to competing fixed-income investments,” commented Joel Friedman, Director of funds research at S&P, in a statement.

Turning in an especially nice performance during the third quarter was the Franklin AGE High Income Fund, up 5%.   This was followed by other top performers such as:

  • MainStay Funds High Yield Corporate Bond Fund (4.9%)
  • Loomis Sayles Investors Trust Institutional High Income Fund (4.9%)
  • John Hancock High Income Fund (4.7%)
  • Strong Advisor Strategic Income Fund (4%).

Conversely, the quarter’s worst performers list was headlined by the EquiTrust Series:   Strategic Yield, off by 0.7%.    Others at the bottom included Merriman Investor Trust:   High Yield Bond Fund and WM High Yield Fund, both with zero gain over the past three months.

“With Standard & Poor’s Chief Economist, David Wyss, forecasting that the Federal Reserve will not increase interest rates until after the next year’s presidential election, the continued low interest rate environment coupled with the strengthening economy and lower default rates should continue to benefit high-yield funds, although portfolio managers will have to search harder for opportunities following this year’s big gains,” Friedman predicted.