Lots of talking heads pushing 'bond bubble' scenario. I can understand this fund tanking if the bonds they hold are downgraded. BUT with it's high yield it would still be very attractive over a ten year T yield of 4% or a stock divi of 3-5%. Of course, short term, the tide could affect all boats. To me this thing still looks cheap! Ideas out there?
DHF is leveraged and could be subject to a double whammy if interest rates rise. Bond prices would fall and their cost of rolling debt would increase. Still, given the alternatives, it seems like a good place to be parking money .
Why would interest rates rise? Answer: because economic activity has increased to the point that the fed is worried about inflation and needs to keep a lid on the emerging party. What does this do to the price of high yield bonds? Answer: Since economic activity is increasing, the risk premium for high yield bonds goes down, which means the price goes up. Bottom line: The yield goes down because a) the price went up, which is fine by me, and b) the expenses go up slightly due to the cost of leverage. I'll take that scenario any day.