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High Yield May Be Priced for Perfection

High-yield bond rally has been driven by better performance in CCC bonds and the energy sector.

Sumit Desai: The high-yield bond market has staged an impressive rally so far in 2016 after bottoming in mid-February. Year-to-date, the average fund in Morningstar's high-yield bond category is up almost 12%, making it one of the best-performing taxable bond categories this year.

Digging a little deeper, it's interesting to see what's been driving these returns. The areas of the market that were hit the hardest in 2015 are also the best performing segments this year. Lower-rated CCC bonds are up 30% in 2016, and the energy sector is up 33% through the middle of October.