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The global economy has to deal with higher structural inflation forces driven by aspects such as geopolitics (i.e. new tariffs, near-/on-shoring), energy transition, demographics or elevated fiscal spending. However, over the next 12 months, the US inflation could tame somewhat towards 2.5% as service inflation is expected to cool. This current disinflation trend is expected […]
Service inflation in the U.S. is cooling down Read More »
US High Yield corporates are delivering solid results following a first quarter of earnings beats and generally positive guidance. Although leverage ratios have seen a minor increase of 0.05x in 2024, leverage ratios remain well below the long-term average of 4.31x, currently standing at 3.98x. This ratio has been stable below 4x since the second
US High Yield maintains stable credit metrics Read More »
The global economy is demonstrating resilience, especially for the US, China, and emerging markets. The risk of a global recession has diminished, with emerging markets outperforming advanced economies. Equity markets hit new highs in Q2 2024, bolstered by strong economic fundamentals and growing investor confidence. Persistently high inflation led to diminished expectations for a significant
Q3 2024 – Quarterly Investment Letter Read More »
The remaining maturities for high yield bonds and leveraged loans for 2024 account for only around 1% of the total market. The significant volume of bond refinancings in 2024 and 2023 after a year of record lows in 2022 has led to this accelerated debt absorption. The USD 30 billion of outstanding bonds and loans
High Yield maturity wall for 2024 & 2025 largely cleared Read More »
The syndicated loan market shows better credit metrics as compared to 2022 when interest rates started to spike. In the interim, some of the weakest companies suffered a default or went through a restructuring, but most companies were able to adapt to the new challenging economic market environment. On the one hand, leverage metrics, measured
Leverage in syndicated loans had peaked in 2022 Read More »
In the past two years, net issuance of high-yield bonds has declined significantly. A sharp rise in the cost of capital coupled with a phase of enormously increased new issues in 2020 and 2021 led to a slump in the size of the European high-yield market. In addition, there are a considerable number of issuers
Shrinking new issues underpins European HY market Read More »
Core economies sustained late-stage expansion, while China pursued policy adjustments aimed at stimulating economic growth. Market optimism drove the S&P 500 to record highs, supported by robust economic indicators, including a strong job report and GDP growth exceeding expectations. The Federal Reserve’s hawkish stance on interest rates and uncertainties surrounding inflation and domestic demand tempered
Q2 2024-Quarterly Investment Letter Read More »
There is significant dispersion in the European High Yield market indicating an increasing divergence between BB/B and CCC rated credits. Unlike in the European market, this divergence did not occur in the same magnitude in the US. European dispersion is mainly driven by concrete events in large issuers and idiosyncratic names mainly related to the
CCC bonds ask for high caution, but offer also opportunity Read More »
The performance of local emerging market debt portfolios has historically been relatively closely negatively correlated with changes in the US 10-year treasury yield. For example, the drop in US 10-year yield during 2020 COVID pandemic preceded rally in local EM debt. Subsequently, rise in US inflation and interest rates in 2022 triggered a selloff across
Local EM returns in context with 10-year US treasury yield Read More »
Following the rally on credit markets during Q4 2023, more than a third of US High Yield keeps trading at credit spreads below 200bps over risk-free rates. On a risk-adjusted basis, such spreads remain tight from a historical perspective, especially when a challenging macroeconomic outlook is considered. While overall a yield of 8% on US
Over a third of US HY keeps tight spreads after Q4’23 rally Read More »
