Ba BB Speculative Investment - exposure to adverse business, financial or economic conditions. B B Payment capacity exists in the short run - likely impaired by negative business conditions. Caa CCC Vulnerable - dependant upon a favorable business climate. Ca CC Highly Speculative - marked shortcomings present. C C Lowest Quality - unlikely to attain any real standing.
Total return is the sum of interest earnings and principal appreciation.
And with high yield bonds trading at a discount, that appreciation of principal can add significantly to the return on the investment. Detecting relative value refers to the process of comparing the potential returns of two different investments, including quantifying their differences. There are numerous such relationships, based upon maturity, rating, fundamental value, credit seniority, industry outlook or market sentiment. In addition, unlike the U.S. Treasury or even most municipalities, the business outlook for a corporation is always evolving. As a result of these factors, in order for portfolio managers and analysts to maximize returns they must actively manage these positions.