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High yield and equities – in the same classroom?

Equities and high yield bonds follow each other wherever they go, both when it comes to fund flows and returns, as we discussed last week on this site. The Barclays Global High Yield Index even followed stocks down on Monday in the aftermath of the breakdown of talks between Greece and its creditors. So, if high yield bonds behave more like equities than like investment-grade bonds, what does that mean for portfolio construction? Should the seemingly inseparable twins be placed in the same classroom or is it better to separate them?

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