According to T. Rowe Price, the market has expanded sixfold since 2000, with debt outstanding approaching US$2.5 trillion by mid-2025.
US issuers, once dominant at more than 80 per cent of the market, have slipped to below 60 per cent, while European issuers make up 22 per cent and emerging markets about 17 per cent.
“This expansion has led to a more diverse opportunity set within the asset class, encompassing various industries, economic cycles and legal regimes,” the fund manager said. “It’s an area ripe for active investing.”
The report pointed to two growth avenues: Germany’s defence and infrastructure stimulus, alongside broader fiscal expansion across Europe, which should meaningfully lift the region’s outlook; and emerging market corporates, which provide exposure to faster-growing economies, more diverse sectors and, in some cases, stronger issuers.
“Conducting bottom‑up research is vital to uncover the industries and companies capable of navigating these changes as they take hold,” T. Rowe Price said.
The report also highlighted a significant uplift in credit quality, noting that BB-rated bonds – the highest sub-investment grade rating – now represent around 60 per cent of the global index, compared with 41 per cent before the Global Financial Crisis (GFC).
Meanwhile, CCC-rated securities have fallen from nearly 16 per cent to under 8 per cent.
“The current high-yield market is barely recognisable from the pre‑GFC days,” the wealth manager said.
“High-yield companies, overall, are larger and generate higher earnings on average than prior to the GFC,” T. Rowe Price added, pointing to the rise in secured bond issuance as another sign of resilience. “Taking all these factors together, the asset class is in a position of strength to navigate more uncertain and volatile markets.”
For investors, the attraction is not only the size and quality of the market but also its track record, with T. Rowe Price noting that global high-yield debt has delivered some of the strongest risk-adjusted returns in fixed income over the past decade.
Samy Muaddi, head of emerging markets, said the asset class was “in a position of strength to navigate more uncertain and volatile markets”.
T. Rowe Price added that upcoming fiscal stimulus in the US, Germany and China should provide longer-term support.
“A high-yield allocation should be considered strategic and long-term rather than tactical,” portfolio manager Mike Della Vedova said.
Acknowledging that credit spreads have tightened, T. Rowe Price said all-in yields remain attractive but warned that geopolitical turbulence makes bottom-up research and rigorous risk management critical.
