In the Recovery Phase of the Credit Cycle

High-Yield and Bank Loan Outlook

Second Quarter 2021

Here are the key takeaways from our latest High-Yield and Bank Loan Outlook report:

  • The credit cycle framework suggests that we will progress to other phases before experiencing another wave of default activity, which eases our concerns about historically tight credit spreads.
  • Fundamental conditions support staying long credit despite historically tight credit spreads, just as they did in the early 1990s when spreads stayed near similar levels for years.
  • Based on the pace of rating upgrades in the first quarter of 2021, almost 28 percent of the current high-yield index could receive an upgrade of at least one notch by the end of the year.
  • As default probability falls with credit rating upgrades, we think it makes sense to look further down the credit spectrum.

    Click here to read the full report

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