U.S. corporate bonds with shorter durations to maturity produce higher yields when spreads are volatile, according to a Goldman Sachs report referenced on CNBC's website. Generally, corporate bonds with less than ten years to maturity are more insulated from interest rate changes, as indicated by certified financial planner Barry Glassman.Continue Reading
Return potential is appealing when spreads are volatile, but yields move inversely to prices. When the spread narrows, potential return is less attractive. In March 2015, Goldman Sachs recommended short-term U.S. corporate bonds because of the yield difference with European bonds. The strong dollar and low oil prices increased demand for U.S. bonds, and spreads between price and yield were more volatile in the short term.
Glassman Wealth Services president Barry Glassman also recommends buying short-term corporate bonds because they are less sensitive to interest rate changes. Bonds with long durations do not offset rising interest rates that decrease bond prices. Bonds with high yields over shorter periods are better insulated from price declines.
Buying floating-rate corporate bonds is another tip for getting high yields, according to Mr. Glassman. These types of bonds pay a floating rate that adjusts the yield during a reset period, typically monthly or quarterly. The bonds accommodate interest rate increases in the short term, as reflected by the change in yield.Learn more about Investing