In this video, Tom Ross, corporate credit portfolio manager, discusses the global high yield market, exploring the near term outlook, whether defaults might pick up and where they are seeing the best opportunities.

Key takeaways

  • The crossover space between investment grade and high yield globally continues to offer an attractive hunting ground as valuations and yields do not always reflect the assigned credit ratings.
  • A continuance of low but positive growth could see spreads grind tighter but there are several catalysts from politics to technical concerns in the loan market that could cause spreads to widen.
  • There is no real need for European high yield companies to lever up so we do not expect significant net supply in Europe, which together with an accommodative central bank should create a supportive technical backdrop for this region.

 

Notes
Rising stars: Bonds that are rated sub-investment grade and are on the path to being upgraded to investment grade
Fallen angels: Bonds that were previously rated investment grade and are downgraded to sub-investment grade
ESG: Environmental, social and governance refers to criteria that investors can use to asses a company in terms of sustainability. Environmental criteria can include a company’s use of resources and how it meets environmental regulations, social criteria consider how a company manages relationships with the community and stakeholders and is responding to demographic changes, while governance criteria cover areas such as management controls and accounting integrity.
Wireline: This refers to information and telecommunication services where there is transmission of data over a physical filament. Examples include copper-wire telephone networks, cable television and fibre-optic communication.