By Michael Aneiro

Junk bonds are already up more than 6% so far in 2013 a year when other types of bonds have stumbled but that doesnt preclude high yield from continuing to outperform. So says ING Investments in its latest fixed-income report:

Despite not really weakening through the noise in Washington, the high yield market is biased to the upside given strong technicals and still-supportive fundamentals. Until more supply comes on line, the path of least resistance seems higher, though the sub-6% yield quickly takes some attractiveness out of the market. We may get a year-end rally, but the looming debt-ceiling debate is likely to limit its magnitude and/or duration.

Longer term, high yield appears well positioned to outperform most other fixed income assets. With investors more concerned about interest rate risk than credit risk, high yield spreads offer more-than-adequate compensation for likely credit losses and the ability to absorb at least a portion of any further rise in interest rates.

In this range-bound, opportunists bond market that we seem to be in, I think junk bonds can come close to another coupon-clipping year in the year ahead, without too much in the way of default risk. But youd do well to time your entry points so that youre buying when average junk-bond yields havent dropped too far below the 6% level and the average price isnt above 103 cents on the dollar. In the past two weeks the average yield across the high-yield market has dropped below 6%. most recently to 5.68%, and the average price is back up above 103 cents to 103.55, per a benchmark Bank of America Merrill Lynch index.

As for high-grade corporate bonds, heres ING again:

Investment grade spreads have tightened in October as concerns around the debt ceiling have eased. A good start to third quarter earnings season and a slowdown from the record new-issue supply in September have also contributed to recent performance. Solid bank earnings and a lack of new supply have supported the recent move tighter in financials, which have led the asset class.

Corporate profitability remains relatively robust, though profit growth has slowed sharply; combined with steady debt growth, this has pushed leverage closer to the upper end of its historical range, though leveraged buyouts have not been persistent. Despite the sharp rally in the last two weeks, we still consider investment grade spreads attractive and expect some modest spread tightening into year end.

Checking the big corporate bond exchange-traded funds, the  iShares iBoxx $ High Yield Corporate Bond Fund  ( HYG ) closed down 2 cents Monday to $93.61 and the  SPDR Barclays Capital High Yield Bond ETF  ( JNK ) closed up 3 cents at $40.70. The iShares iBoxx $ InvesTop Investment Grade Corp. Bond Fund  ( LQD ) closed up 11 cents to $115.43.