High yield corporate bonds are speculative-grade securities (a much higher level of credit risk) that tend to pay a higher rate of interest than their investment-grade counterparts. 

One of the primary indicators used for assessing risk levels in the high yield corporate bond market is the industry default rate. A bond default occurs when the issuer fails to make an interest or principal payment within the specified period.

The long-term global speculative-grade default rate, as tracked by Moody's, has averaged 4.1% since 1983, according to its own release. In April 2019, the default rate stood at 2.1%. 

Moody's believes that the default rate will be lower a year from now. It is currently forecasting a default rate of 1.3% at the end of April 2020. 

As indicated in the chart, asset levels in high yield corporate bond funds relative to total taxable bond fund assets dropped dramatically during the 2008-2009 financial crisis. 

Except for 2013, a year in which bond yields rose markedly, asset levels have remained below the category's average from 2000-2018 (see chart). 

In 2013, the yield on the benchmark 10-year Treasury note increased 127 basis points, from 1.76% to 3.03%, according to Bloomberg. We believe yields rose on the belief that U.S. economic growth could accelerate in 2014. It did not come to fruition.  

From 2000-2018, total high yield corporate bond issuance as a percentage of total corporate bond issuance averaged 16.7% (not shown in chart), according to data from SIFMA. 

From 12/31/99-12/31/18, a period that included many challenges and shocks to the economy, the BofA Merrill Lynch U.S. High Yield Constrained Index posted an average annual total return of 6.69%, according to Bloomberg. For comparative purposes, the S&P 500 Index posted an average annual total return of 4.86% over the same period.