Yield Bets Pay Off for Traders Willing to Tune Out War Risks (1)

Those credit investors who gambled on higher-yielding corporate bonds in the midst of the Iran war are looking increasingly vindicated as markets rebound on hopes of a lasting truce.

The decision to buy bonds as Iran and the US exchanged missile-fire was always a high-stakes one. It required a belief that a spike in overall yields on the back of rising government borrowing costs would be enough of a buffer against a prolonged energy shock and the threat of inflation.

The trade to lock-in higher levels of income is now paying off for portfolio managers on both sides of ...