High-yield bonds, otherwise known as speculative grade or junk debt are bonds issued by companies that carry a rating of 'BB' or lower from Standard & Poor's or 'Ba' or below from Moody's. They have a higher risk of default compared to investment-grade debt but give a better return for investors as yields are higher.
Chief investment strategist at BlackRock, Stephen Cohen said high-yield ETF (exchange-traded fund) pricing has "done exactly what you would expect" following the junk bond sell-off, which resulted in record trading volumes in the largest high-yield ETFs, including BlackRock iShares HYG.
"I don't think Third Avenue is really reflective of what they (high yield)) were doing. I think one of the differences here is that it is described as a high-yield fund. A lot of the constituents of the fund were very, very low grade, non-rated, very illiquid securities," Cohen told CNBC.
"It was a huge test, if you look at the volumes, we had $4 billion on Friday in HYG. But the vehicles traded exactly how you would hope them to trade. I think really importantly – you have seen new types of investors move to these vehicles, so you are seeing a big two-way market," he added.
Fixed income asset management specialist Western Asset Management, which manages around $446 billion, said it was still keen on the high-yield space, even in the energy sector, despite recent fears.