TURNKEY SOLUTIONS FOR WEALTH MANAGER AND FUND MANAGER
With yields at almost 10% p.a., US HY offers investors a very solid buffer during adverse market development. This can be illustrated by a hypothetical multi-factor 12-month scenario, stressing the projected total return with a simultaneous risk-free rate curve steepening (-25bps on short and +100bps on long maturities), credit spreads widening (+200bps) and elevated realized […]
Elevated income buffers adverse market development Read More »
Historically, the income and total returns on European broadly syndicated loans have been comfortably exceeding realized default losses. This trend is evident from the chart with incomes, comprising of interest and fees, exceeding 4% and realized losses well below 1%. Total returns with mark-to-market component have also remained strong with the exception of 2022 market
Income on European loans in context with default losses Read More »
After a difficult 2022, first lien syndicated loans have been generating exceptional performance so far this year, returning 8.5% YTD as of August. Thanks to floating-rate coupons and consequently short duration, the senior first lien loans have benefited from rising benchmark rates. They have also outperformed fixed-rate HY bonds, which have exhibited higher return volatility,
First lien loans keep outperforming other high yield credit markets Read More »
Following further slowdown in inflation expectations, real rates have surged in the last three months and are now exceeding 2%. The positive long- and short-term real rates benefit fixed income investors across entire spectrum of credit market sectors. Due to relatively tight investment grade credit spreads, real yields of 3.5% on IG corporates only slightly
Increase in US real rates supports credit investments Read More »
At 430 bps, the spreads on BBB-rated US CLOs remain well above BBB bonds (140 bps) and even split-rated BBB/BB loans (270 bps) – see chart 10 above for overall CLO yield context. There are various reasons for this anomaly, including higher flows-driven volatility. From the pure credit loss-perspective, the BBB CLO tranches are extremely
Spreads on BBB CLOs remain high despite structural strengths Read More »
While increasing risk free rates have been the key drivers of rising yields and returns of syndicated loans during the last twelve months, the credit spreads, represented as discount margins over floating benchmark rate, have exhibited significant volatility during the same period. Single B-rated loans have been widening disproportionately, with increasing risk premia sensitivity evident
Syndicated loans discount margins remain elevated Read More »
Credit spreads on emerging market debt have tightened significantly since late last year. While slowing-down inflation in the US has supported the overall EM sentiment, one of the key internal drivers of the EM rally was China’s economy reopening. The removal of COVID-19 restrictions has released pent-up demand in the world’s second largest economy. Excluding
Emerging Markets Credit Spreads Tightening Read More »
One of the fastest rate increase paths in modern history has led to a true paradigm shift in US Treasury rates. Compared to one year ago, the rate levels are now higher and have negative term premia causing inversion anywhere beyond the 6-months tenor. Such inversion indicates recession risk, which remains a topic of debate
Paradigm Shift In Rates: Higher & Inverse Read More »
Since 2000 the share of US loans rated B and below has more than doubled and now accounts for 57% of the total loan market. In contrast, the weight of HY bonds rated B and below has almost halved to 33%, partly due to the recent rise of “fallen angels” (IG bonds downgraded from BBB
Increased risk-/return profile of US loans vs. US HY bonds Read More »
Central banks moved away from easy money policies and changed course. Not only the interest rate hikes but also the liquidity withdrawals have affected the markets and will continue to do so. After years of quantitative easing with ballooning balance sheets, the regime shift means that central banks will no longer backstop markets – unless
Central banks’ balance sheets changed course Read More »
