For Institutional Investors in Australia

Global Perspectives podcast: the high is back in high yield

Portfolio Managers Seth Meyer and Tom Ross join Adam Hetts, Global Head of Portfolio Construction and Strategy, to discuss the prospects for the global economy and why relatively robust fundamentals among high yield borrowers offer grounds for optimism, given that markets have already priced in many of the inflation concerns.

Key takeaways

  • High yield bond prices have sold off as rising interest rates have weighed on returns and non-traditional investors (so-called tourists) exited the asset class, but their relatively high yields have typically helped them outperform investment-grade corporate bonds and government bonds in the first few months of 2022.
  • COVID tested high yield issuers but it also prompted useful refinancing and higher cash reserves, meaning many issuers would go into any economic slowdown from a position of strength. Sectors of the economy are still dislocated, however, so it is necessary to look at corporate issuers on a case-by-case basis.
  • The rapid rise in government bond yields, particularly among U.S. Treasuries, has pushed up the yield on high yield, providing an opportunity for investors to more convincingly achieve the name of the asset class – high yield.
Seth Meyer, CFA

Seth Meyer, CFA

Portfolio Manager


Tom Ross, CFA

Tom Ross, CFA

Portfolio Manager


Adam Hetts, CFA

Adam Hetts, CFA

Global Head of Portfolio Construction and Strategy


10 May 2022

This information is issued by Janus Henderson Investors (Australia) Institutional Funds Management Limited (AFSL 444266, ABN 16 165 119 531). The information herein shall not in any way constitute advice or an invitation to invest. It is solely for information purposes and subject to change without notice. This information does not purport to be a comprehensive statement or description of any markets or securities referred to within. Any references to individual securities do not constitute a securities recommendation. Past performance is not indicative of future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

 

 

Whilst Janus Henderson Investors (Australia) Institutional Funds Management Limited believe that the information is correct at the date of this document, no warranty or representation is given to this effect and no responsibility can be accepted by Janus Henderson Investors (Australia) Institutional Funds Management Limited to any end users for any action taken on the basis of this information. All opinions and estimates in this information are subject to change without notice and are the views of the author at the time of publication. Janus Henderson Investors (Australia) Institutional Funds Management Limited is not under any obligation to update this information to the extent that it is or becomes out of date or incorrect.

Seth Meyer, CFA

Seth Meyer, CFA

Portfolio Manager


Tom Ross, CFA

Tom Ross, CFA

Portfolio Manager


Adam Hetts, CFA

Adam Hetts, CFA

Global Head of Portfolio Construction and Strategy


10 May 2022