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Voya High Yield Bond Fund Quarterly Commentary - 4Q25

Key Takeaways

High-yield (HY) bonds advanced in the fourth quarter.

For the quarter, the Class I shares of the Fund outperformed the benchmark on a net asset value (NAV) basis.

2026 U.S. economic growth could surpass that of 2025, with potential tailwinds including stimulus from the One Big Beautiful Bill Act (OBBBA) (tax cuts and refunds as well as capital spending acceleration), foreign direct investment from overseas, continued monetary policy easing (including the recently announced asset purchase program), and steady consumption.

Total return approach, investing in below investment grade corporate securities.

Portfolio review

HY bonds advanced in the fourth quarter. Third-quarter earnings results beat expectations on strong artificial intelligence (AI) spending, though management commentary highlighted cost pressures and uneven demand trends. Economic data was mixed and visibility was impacted by the government shutdown; labor market indicators softened, while consumer spending and inflation metrics were stable. The U.S. Federal Reserve cut rates by 25 basis points (bp) in both October and December, and signaled further accommodation with markets pricing additional cuts into 2026. Against this backdrop, the 10-year U.S. Treasury yield finished modestly higher at 4.17% despite significant intra-quarter volatility. 

The ICE BofA US High Yield Index returned 1.35% for the quarter, bringing full-year performance to 8.50%. BB, B, and CCC rated bonds returned 1.57%, 1.55%, and –0.52%, respectively. Spreads modestly widened to 281 bp from 280 bp, the average bond price fell to 98.06, and the market’s yield rose to 7.08%. Industries were mostly positive for the period. Gaming, metals, and healthcare outperformed whereas packaging and paper, chemicals, and cable underperformed. Trailing 12-month default rates finished the period at 1.88% (par) and 1.40% (issues). The upgrade and downgrade ratio increased to 1.3. Quarterly new issuance saw 75 issues priced, raising $65.4 billion in proceeds, bringing the full-year total to $332.0 billion. Mutual fund flows were estimated at $1.9 billion. 

For the quarter, the Class I shares of the Fund outperformed the benchmark on a (NAV) basis. The portfolio’s underweight to CCC rated bonds, which underperformed BB and B rated bonds, was a relative performance tailwind. Industries helping relative performance in the period included financial services, cable and satellite TV, and building materials. Security selection was the main source of strength in financial services, with an industry overweight providing a modest additional benefit. Overweight exposure to several outperforming issues from media companies drove performance in the cable and satellite TV industry. Within building materials, relative strength was attributable to positioning in issues in concrete products, exterior materials, and metal fabrication, offsetting a minor negative impact from an industry overweight. Industries detracting the most from relative performance in the period were healthcare, support-services, and gaming. The primary source of weakness in healthcare was exposure to an underperforming pharmaceutical issue, with some additional detraction stemming from an industry underweight. Security selection weighed on performance in support-services, primarily due to overweight positioning in an equipment rental issue. Within gaming, security selection across several casino operators had the largest negative impact.

Current strategy and outlook

2026 U.S. economic growth could surpass that of 2025. Potential tailwinds include stimulus from the OBBBA (tax cuts and refunds as well as capital spending acceleration), foreign direct investment from overseas, continued monetary policy easing (including the recently announced asset purchase program), and steady consumption. Reshoring activity, less regulation, expanding credit, and a rebound in consumer and business confidence are also potential drivers. Improvements in the housing or manufacturing sectors could aid growth as well. Key economic risks include heightened geopolitical tensions and elevated fiscal deficits globally. Additionally, if unemployment or inflation rise sharply, the odds of an economic slowdown increase. 

In an environment where changes in the labor market and prices are more muted, the Fed can continue to target a neutral policy position. Currently, market odds suggest additional interest rate cuts to a range of 3.00–3.25%—a level that is consistent with the Fed’s median, longer run projection of 3%. 

The U.S. HY market, yielding more than 7%1, offers equity-like returns but with less volatility. The asset class is expected to deliver another year of coupon-like returns in 2026. The market’s attractive total return potential is a function of its discount to face value and higher coupon, which also serves to cushion downside volatility. Credit fundamental factors are stable, near-term refinancing obligations remain low, and management teams continue to exercise balance sheet discipline. Additionally, the market’s credit quality composition has improved. In this environment, new issuance is expected to remain steady, spreads can stay tight, and the default rate should continue to reside below the historical average. 

Longer-duration issues are the most likely to be impacted by high and volatile rates, but the overall HY market should have a dampened response due to its larger coupon relative to other fixed income alternatives. As a result, U.S. HY bonds contribute from both a diversification and a relative-performance perspective, offering a very compelling yield opportunity. 1Source: ICE Data Services; data as of December 2025

Related Resources

Voya High Yield Bond Fund Fact Sheet

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1 Source: ICE Data Services; data as of December 2025

The Bloomberg U.S. High Yield 2% Issuer Capped Index is an unmanaged index comprised of fixed rate, non-investment grade debt securities that are dollar denominated and non-convertible. The index limits the maximum exposure to any one issuer to 2%.Index returns do not reflect fees, brokerage commissions, taxes or other expenses of investing. Investors cannot invest directly in an index. Source: Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Bloomberg does not approve or endorse this material, nor guarantee the accuracy or completeness of any information herein, nor make any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, shall not have any liability or responsibility for injury or damages arising in connection therewith.

All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. You could lose money on your investment and any of the following risks, among others, could affect investment performance. The following principal risks are presented in alphabetical order which does not imply order of importance or likelihood: Bank Instruments; Company; Credit; Credit Default Swaps; Currency; Derivative Instruments; Environmental, Social, and Governance (Fixed Income); Foreign (Non-U.S.) Investments/ Developing and Emerging Markets; High-Yield Securities; Interest in Loans; Interest Rate; Liquidity; Market; Market Capitalization; Market Disruption and Geopolitical; Other Investment Companies; Preferred Stocks; Prepayment and Extension; Securities Lending; U.S. Government Securities and Obligations; Zero-Coupon Bonds and Pay-In-Kind Securities. Investors should consult the Fund’s Prospectus and Statement of Additional Information for a more detailed discussion of the Fund’s risks.

The strategy is available as a mutual fund or variable portfolio. The mutual fund may be available to you as part of your employer sponsored retirement plan. There may be additional plan level fees resulting in personal performance that varies from stated performance. Please call your benefits office for more information. Variable annuities and group annuities are long-term investments designed for retirement purposes. If withdrawals are taken prior to age 59½, an IRS 10% premature distribution penalty tax may apply. Money taken from the annuity will be taxed as ordinary income in the year the money is distributed. An annuity does not provide any additional tax deferral benefit, as tax deferral is provided by the plan. Annuities may be subject to additional fees and expenses to which other tax-qualified funding vehicles may not be subject. However, an annuity does provide other features and benefits, such as lifetime income payments and death benefits, which may be valuable to you. All guarantees are based on the financial strength and claims paying ability of the issuing insurance company, who is solely responsible for all obligations under its policies. Insurance products, annuities and funding agreements issued by Voya Retirement Insurance and Annuity Company (“VRIAC”), One Orange Way, Windsor, CT 06095, which is solely responsible for meeting its obligations. Plan administrative services provided by VRIAC or Voya Institutional Plan Services, LLC (“VIPS”). Securities distributed by or offered through Voya Financial Partners, LLC (“VFP”) (member SIPC) or other broker-dealers with which it has a selling agreement. Only Voya Retirement Insurance and Annuity Company is admitted and can issue products in the state of New York.

Credit quality is based on third-party agency ratings , ranging from AAA (highest) to D (lowest). If ratings are available from each of S&P, Moody's and Fitch, the security is assigned the median rating. If ratings are available from only two of these agencies, the lower rating is assigned. If a rating is available from only one of these three agencies, then that rating is used. If none of S&P, Moody's and Fitch rate the security but it has a Morningstar DBRS rating, then the Morningstar DBRS rating is used (see https://dbrs.morningstar.com/about/disclaimer). Any security that is not rated by these four agencies is placed in the Not Rated (NR) category. Ratings do not apply to the Fund itself or to the Fund shares. Ratings may not accurately reflect risk and are subject to change.

This commentary has been prepared by Voya Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities.

The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Portfolio holdings are fluid and are subject to daily change based on market conditions and other factors. Past Performance does not guarantee future results.

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