While a global approach provides advantages for many fixed income sectors, the benefits are less clear for high yield.
This is because many of the factors that underpin the reasons for investing globally, namely an enlarged and diversified investment universe, do not apply. Despite more than trebling in size since 2012, European high yield (the largest non-US developed high yield market) is still only a small part of the overall universe, which continues to be dominated by the US.
As of April 2025, 70% of the global high yield corporate bond market was USD-denominated bonds. Comparing the US and developed global high yield bond markets highlights that the two are closely aligned, with the only notable difference that the global universe has slightly higher exposure to the banking sector. This is offset by increased weights to consumer cyclical, energy, capital goods and technology in the US high yield market.
When comparing the indices, it is also worth noting the US high yield index includes US dollar-denominated issuance from non-US companies, which currently represents 13% of the index. A lack of familiarity with these non-US names can mean such issuance often attracts a premium over their domestic bonds, providing investors with a potential additional source of return.
Given the similarity of regional and sector breakdowns between the two indices, the diversification benefits of a global approach are limited.
