NEW YORK, Nov 06, 2020 (GLOBE NEWSWIRE) – Guggenheim Investments, the global asset management and investment advisory business of Guggenheim Partners, today presented its outlook for bank and high yield loans in the fourth quarter 2020. Entitled “Credit Opportunities Under Challenging Conditions,” the report explains that while credit spreads have ample room to tighten, there is an overhang of a challenging credit environment as measured by credit spreads. market default rate, ratings migration and fundamentals.
Among the highlights of the 16-page report:
- Central bank action played a key role in supporting the availability of credit, tempering forward expectations of default rates. However, we expect certain sectors, namely energy and retail, to continue to suffer from defaults in the future.
- Avoiding these defaults is crucial, as investors only recover on average 40% and 70% of par in high-yield defaults and on bank loans, respectively, and recoveries since the start of the year have were significantly lower than these averages.
- Credit spreads remain near the 60th percentile of historical observations going back to 1998, giving them ample room to tighten.
- The cumulative 12-month high yield bond net leverage ratio of 4.5x has already passed the 2008-2009 default cycle peak of 3.9x, and is expected to worsen as 2019 data is excluded of calculation.
- This year, we have selectively added high yield exposure to longer maturity bonds, including angel investors.
- Our research shows that fallen angel prices tend to rebound after entering the high yield index, confirming the existence of a structural anomaly that causes them to be oversold around the index transition period. towards wider spreads than the fundamentals justify.
- All indications point to continued improvement in sub-investment grade bonds. Any setback should be viewed as temporary and, as such, an opportunity to add positions.
For more information, please visit http://www.uggenheiminvestments.com.
About Guggenheim Investments
Guggenheim Investments is the global asset management and investment advisory division of Guggenheim Partners, with more than $ 233 billion1 in total assets through bond, equity and alternative strategies. We focus on the risk and return needs of insurance companies, private and public pension funds, sovereign wealth funds, endowments and foundations, consultants, wealth managers and high net worth investors. Our more than 300 investment professionals conduct rigorous research to understand market trends and identify undervalued opportunities in areas that are often complex and under-tracked. This approach to investment management has enabled us to offer innovative strategies offering diversification opportunities and attractive long-term results.
1. The assets under management of Guggenheim Investments as of 30.09.2020 and include a leverage effect of 14 billion dollars. Guggenheim Investments represents the following affiliated investment management companies of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, GS GAMMA Advisors, LLC and Guggenheim Partners India Management.
Investing involves risks, including the possible loss of capital. The potential impacts of the COVID-19 outbreak are increasingly uncertain, difficult to assess and impossible to predict, and can lead to significant losses. Investments in fixed income instruments are subject to the possibility that interest rates will rise, causing their value to fall. High yield and unrated debt securities have a higher risk of default than investment grade bonds and may be less liquid, which can increase volatility.
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