Investors develop a taste for junk

High-yield bonds are staging a bit of a comeback.

One of the hardest-hit areas of the market in 2016, so-called junk bonds rose 1 percent on Monday, as measured by the popular iShares High-Yield Corporate Bond ETF (HYG). That's that 10th winning session for high-yield bonds out of the past 11, in a move that has taken the HYG up nearly 7 percent from the multiyear low it hit in mid-February.

"This clearly [shows] that investors are willing to take a little more risk," Erin Gibbs, equity chief investment officer with S&P Investment Advisory Services, said Monday on CNBC's "Power Lunch."

A large part of the bounce is likely oil related. The HYG's low corresponded to the low in crude oil, and over the past year, the HYG has actually enjoyed a higher correlation to crude oil than the S&P 500 has, according to a CNBC analysis of FactSet data. The high-yield ETF actually only has a moderate-sized holding of energy sector bonds (8.9 percent), but many concerns about default have been focused on the energy sector, meaning that energy market development may impact the entire product disproportionately.

High-yield bonds can be thought of as the stocks of the bond world. While technically fixed-income products, they pay higher rates due to higher expected probabilities of default. This means that they closely track what's happening in the economy and the stock market, since a better economic and financial outlook decreases the chances of bankruptcies. Over the past year, the HYG and the S&P have seen a correlation of 0.66.

Read MoreHigh yield rebound in 2016?

"I think that some people have to realize they're adding a lot of volatility and real risk when they add risk to the portfolio in the high-yield space," Max Wolff of Manhattan Venture Partners warned on Monday on CNBC.

In other words, investors shouldn't hear the word "bonds" and think "safe."

The bright side, of course, is the advertised high yields. The ETF yields more than 6 percent, putting most of the highest-dividend-paying stocks to shame.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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