With central banks tightening aggressively to beat down inflation, growth is beginning to slow—and the risk of recession is ticking higher. Historically, creditworthiness has soured when growth slows. But instead of bracing for a wave of downgrades and defaults, we think income-seeking investors should embrace the high-yield corporate bond sector.
Looking for a tactical way to de-risk your portfolio? You might consider rotating a portion of your equity allocation into high-yield bonds.
The prospect of rising interest rates has clouded the outlook for global bond investors in 2022, but it’s not all bad news.
High-yield investors should actually root for rates to move higher, rather than lower. And that’s because if rates are moving higher, it means the economy is doing well and companies are generating a lot of earnings, and therefore their credit risk is actually coming down. Which is a really good thing for us as credit investors.
In high yield specifically, investors tend to think about it as a risky way to play fixed income. But we like to turn that thinking on its head, actually: that you should think about it as a way to de-risk your overall portfolio rather than to re-risk your fixed-income side.
The US high-yield market has staged a strong comeback since its downturn at the onset of the COVID-19 pandemic and—despite historically tight spreads—fundamentals for credit continue to improve. Along with a strong global economic recovery, credit spreads are getting positive tailwinds from declining default expectations, falling levels of distressed debt, and improving access to capital.
The US high-yield market has seen a strong comeback since its panic-driven downturn at the onset of the COVID-19 pandemic.
Over the past year, a surge of investors drove high-yield bond prices back to pre-pandemic levels.
Credit markets have staged an epic rebound from the depths of March 2020. But in a low-growth, low-yield world, we believe there may be more room to run in 2021.
The S&P 500 Index hit an all-time high on April 23, thanks to improving investor optimism. But for some equity investors, market highs signal a good time to reduce downside risk. Shifting a modest allocation into US high yield is an efficient way of doing just that—significantly lowering overall risk while only modestly curbing potential returns.
First, the bad news: high-income investors should saddle up for another bumpy ride in 2019. Now the good: with challenges come opportunities—and we see plenty on the horizon for investors who take the long view.
A dramatic fall in oil prices, followed by a sell-off in high-yield energy bonds—is it time to worry about oil and gas companies again? Quite the contrary. The North American issuers that make up most of the world’s high-yield energy market are in a better position today than they have been in years.
How do you blow a No. 2 draft pick? For the New York Giants, it was a combination of bad math and overconfidence. But at least Big Blue can take comfort in having plenty of company: investors, particularly high-yield bond investors, are prone to similar mistakes.