High yield · 3 articles

High yield is priced on the screen and decided in the documents

High yield bonds are the debt of companies that lenders consider meaningfully riskier than the strongest borrowers, and they pay a richer coupon for it. Much of this market sits inside closed end credit funds as well as in the hands of large institutions. The coupon is the part everyone sees. What a holder actually owns is set by the terms around it: when the issuer may redeem the bond, what it may borrow ahead of it, and how easily its protections can be voted away.

My habit is to read the documents before the quote, and the cash flow statement before either. A bond is a promise with conditions, and the conditions decide how much the holder can gain, how much can be taken away, and who gets to choose. Yield figures compress all of that into one number that assumes the issuer behaves politely. The essays in this lane look at the mechanics that number leaves out.