High yield bonds are risky enough that
when nominal yields get low enough, it is probably time to start reducing exposure.
The findings: Traditional defensive sectors such as utilities, telecommunications, real estate and consumer staples provided minimal protection
when nominal yields moved higher.
Not exact matches
When savings are high, the term premium is more likely to be low, in the process keeping
nominal yields down.
So even
when you first purchase a bond, its
nominal yield and
yield to maturity may not match exactly.
(It's a bit similar to the «are stocks expensive» issue: they look expensive in
nominal earnings
yield terms, but not
when seen as a spread over risk free.)
If so, then the
nominal yield when the Fed finishes normalizing interest rates will be around 4 %.