Time to Consider Leveraged Corporate Bond Funds

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

The primary takeaway from last week’s slowdown in inflation for the U.S. economy per the Personal Consumption Expenditures (PCE) Index report is that a rate cut in September is very much on the table, but don’t count out the outside possibility of a cut at the July 31 Federal Open Market Committee (FOMC) meeting. Four more weeks of disinflationary numbers could prompt the Fed to consider starting the easing process, even though the CME FedWatch Tool is showing a nearly 90% probability of no cut in store.


This week, investors will digest the release of the S&P Global U.S. Manufacturing PMI-Final for June, the ISM Manufacturing Index for June, the JOLTS Job Openings for May, the ADP Employment Change for June, the Weekly Initial Unemployment Claims, the S&P Global U.S. Services PMI-Final for June, the Factory Orders for May, the ISM Non-Manufacturing Index for June, the Non-Farm Payrolls and the Unemployment Rate for June. It’s a big week for data the market will certainly trade off of, and because of summer light volume, volatility will likely be elevated.

Assuming the pipeline of data continues to demonstrate disinflation at work, where the economy experiences slowing growth, but no recession, it might behoove income investors willing to go out on the risk curve to take a hard look at high-yield bonds, and specifically leverage high-yield bond closed-end funds that pay double-digit-percentage yields. Following a cycle of 11 rate hikes, this asset class is selling well off the 2022 highs right before the Fed embarked on its tightening cycle.

The investment proposition is a trifecta of catalysts for leveraged junk bond funds. The first being the Fed beginning a cycle of sequential rate cuts that occur over the next 18 months. The second is the cost of leverage declining meaningfully, and the third is the historical price appreciation for fixed income assets in a market where rates are on the decline.


Take for instance one of the largest high-yield corporate bond funds that has $5.2 billion in assets that controls $8.4 billion marketable securities, implying 38% leverage. The PIMCO Dynamic Income Fund (PDI) is one of the most aggressive strategies in the space, and because of its outsized leverage, lost 52% of its value from just before the pandemic to Q4 2023, when the market rallied on hopes of Fed easing.

Since then, the fund rallied on renewed hopes of rate cuts and the fact that the economy didn’t slide into recession, thereby providing a backdrop of improving creditworthiness and more constructive corporate balance sheets for low-rated and non-rated debt. It should be noted that money flow into this fund has been bullish since the beginning of 2024, implying that, though rates have been higher for longer, institutional investors believe that lower rates are indeed forthcoming.

Shares of PDI pay an annual distribution rate of 14.08%, whereas a closed-end fund such as the BlackRock Corporate High Yield Fund (HYT) with $1.4 billion in assets is using 30% leverage to control $1.9 billion in corporate debt securities and pays 9.84%. Both funds pay monthly payments. It is vital that investors do their own due diligence to understand the risks of such funds, but as is with any asset class, timing is everything, and now might be the time to consider the potential for total return.


This is a compelling set up in a market with opportunities to take full advantage of what could be a bullish trend. Professional bond investors have been patiently waiting for when to increase bond weightings in both investment grade and non-investment grade fixed income assets, and just maybe, a trend is developing following the head-fake bond rally earlier this year. If so, this sector gives investors the chance to lock in inflation-crushing yields coupled with capital appreciation.

More light will be shed on this trade during the next four weeks of economic data points released and how the high-yield bond market responds to earnings season. There are times when bond returns can be very impressive, and this might be one of them. To learn more about leveraged corporate bond closed-end funds and other high yield investments paying double-digit-percentage yields, visit my website at www.bryanperryinvesting.com and become a member of Cash Machine, which is beating inflation hands down and providing investors with an amazing stream of steady 10%+ stream of income.

share on:

Like This Article?
Now Get Bryan's FREE Special Report:
Top Monthly Dividend Payers

Get paid every single month by some of the world’s biggest companies.

Get Access to the Report, 100% FREE

share on:


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income PRO (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader


Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor

George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives.  He’s an established investor, bestselling author, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

Product Details

  • Technology Report
  • Technology Report PRO
  • Moonshots
  • Private Reserve
  • Millionaire Circle


DayTradeSPY was founded by head trader Hugh Grossman, a retired internal auditor for a Fortune 500 company. After years of first-hand experience trying out one trading strategy after another, Hugh instead developed his own trading system centered around day trading SPY options. That’s it... Nothing else.

Product Details

  • Trading Room
  • Pick of the Day
  • Inner Circle
  • Online Workshops