A low default rate due to the improving economy and relatively high yields continue to make the high yield bond space attractive said Kevin Lorenz, portfolio manager for the TIAA-CREF High Yield Bond Fund. 'Currently yields are about 6.5%, spreads are about 500 basis points over Treasuries and this is an environment where the default rate continues to be very benign,' said Lorenz. 'The default rate has been under 2%, and while it’s leaking a little bit higher, the long term average is roughly 4.5%.' The TIAA-CREF High Yield Bond Fund is down 40 basis points so far in 2015. The fund has a trailing 12-month yield of 5.35%. Issuance year-to-date had been very strong until this current patch of volatility, said Lorenz. That said, it has been dominated by refinancings which has kept the market from being flooded by new paper. As for the volatility, which has been stoked by problems in China and Greece, Lorenz said it’s a matter of time horizon. '
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