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Reaching for yield, which we define as investor preference for bonds with higher yields at a given rating or for bonds with higher ratings given yields, forecasts lower returns in the cross section than are predicted by yields. Controlling for ratings (yields), alphas are lower for higher yield (rated) bonds. Future returns on bonds associated with reaching for yield are particularly low when interest rates are low, when demand for such bonds among leverage-constrained investors (insurance companies, pension funds, and mutual funds) is strong, and when funding costs to less constrained investors (dealer banks and hedge funds) are high. These bonds also default more often than bonds with similar yields.