Investors worried about a bond bubble risk are missing potential opportunities in the high-yield market, according to AllianceBernstein.
AllianceBernstein have said that investors are underestimating the diversity of fixed income assets and the return potential of high-yield bonds.
"Most commentary questioning the sustainability of low bond yields tends to focus on government bond markets," AllianceBernstein London-based senior portfolio manager Jeremy Cunningham said.
"Comparatively little attention is paid to other sectors of the bond market, such as high-yield bonds, where we see attractive opportunities - both for fixed income investors looking to enhance their yield returns and for equity investors who wish to reduce volatility within their portfolios."
High-yield bonds typically pay higher yields as they represent higher risk than developed country government bonds, making them an attractive prospect in the current low interest rate environment, according to AllianceBernstein.
The investment manager said that another advantage is that high yield bonds are less sensitive to interest rate movements as they reflect credit risk.
Mr Cunningham said that while the recent rise in high-yield bond prices and the fall in yield have prompted concern over a bond bubble, it is unlikely to eventuate.
"As to whether a high-yield bubble exists, we think this is extremely unlikely," Mr Cunningham said.
"True bubbles, such as the tech boom in 2000 and the US housing boom prior to the financial crisis, are driven by greed and unrealistic expectations of continuing asset-price appreciation.
"This is not the case in high-yield bonds where flows are being driven by investors' need for income and a lack of alternative."
However, Mr Cunningham still recommended that investors looking for high returns avoid overweighting portfolios on the lower end of the credit rating spectrum.
