high - High-yield bonds are deeply procyclical assets. Economic expansion strengthens corporate cash flows, reduces default risk, and compresses credit spreads. Recessions trigger spread widening (300bp+ moves common), rising defaults, and significant drawdowns (2008: -26%, 2020: -12% in March alone). The asset class exhibits 0.6-0.8 correlation to equity markets during normal periods, rising to 0.85+ during crises.

Moderate duration risk (3.5-4.5 years) means 100bp Treasury yield increase causes approximately 3.5-4.5% price decline, partially offset by higher reinvestment yields. However, rate sensitivity is asymmetric: rising rates due to growth are often positive (spread compression offsets duration losses), while rising rates from inflation concerns without growth are negative. Fed tightening cycles create refinancing risk for the 30-40% of issuers with sub-investment-grade ratings and elevated leverage (4-6x Debt/EBITDA typical).

income|tactical - Attracts income-focused investors seeking 4-6% yields with equity-like volatility (12-15% annualized). Also used by tactical allocators for credit beta exposure during economic expansions. Not suitable for risk-averse investors given -20% to -30% drawdown potential during recessions. Institutional investors use for liquid high-yield exposure versus direct bond purchases.