Guggenheim Third Quarter 2024 High Yield and Bank Loan Outlook: Lessons from the Distress Ratio: Stay Constructive on Higher Quality High Yield and Bank Loans
2024年7月30日 - 4:45AM
Guggenheim Investments, the global asset management and investment
advisory business of Guggenheim Partners, today provided its Third
Quarter 2024 High Yield and Bank Loan Outlook. Titled “Lessons from
the Distress Ratio: Stay Constructive on Higher Quality High Yield
and Bank Loans,” the report describes the state of the distressed
debt market and explains how it informs our constructive view of
leveraged credit.
Among the highlights in the report:
- High yield credit
spreads and bank loan discount margins remain near multi-year tight
levels, but there is considerable bifurcation in these markets,
with an aggregate of nearly $200 billion in bonds and loans trading
at distressed levels.
- While this figure
might seem elevated, it represents less than 10 percent of the
total market, which is well within historical norms outside of
recessionary periods.
- We remain
constructive on higher quality high yield and bank loans but avoid
these distressed credits.
- The current distress
ratio of 7 percent in the ICE BofA High Yield Index and 11.5
percent in the Credit Suisse Leveraged Loan Index are below their
historical averages, indicating the market's expectation of better
than average outcomes based on the current economic outlook.
- We define distressed
debt as high yield bonds trading at spreads of 1,000 or more basis
points and loans priced below 90 percent of par.
- The communications
industry has the highest volume of distressed debt outstanding,
representing 37 percent of total distressed debt.
- For high-yield
bonds, the distress ratio has been a good indicator of likely
defaults within the next nine–12 months. The relationship for loans
is weaker.
- While distress
ratios often overstate actual defaults, they remain a useful
indicator of market stress.
- Investors should use
these ratios as a guide, coupled with thorough credit analysis, to
identify opportunities and manage risks effectively.
For more information, please visit
http://www.guggenheiminvestments.com.
About Guggenheim Investments
Guggenheim Investments is the global asset management and
investment advisory division of Guggenheim Partners, with more than
$235 billion1 in total assets across fixed income, equity, and
alternative strategies. We focus on the return and risk needs of
insurance companies, corporate and public pension funds, sovereign
wealth funds, endowments and foundations, consultants, wealth
managers, and high-net-worth investors. Our 235+ investment
professionals perform rigorous research to understand market trends
and identify undervalued opportunities in areas that are often
complex and underfollowed. This approach to investment management
has enabled us to deliver innovative strategies providing
diversification opportunities and attractive long-term results.
1. Guggenheim Investments Assets Under Management are as of
6.30.2024 and include leverage of $15.1bn. Guggenheim Investments
represents the following affiliated investment management
businesses 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, Guggenheim Partners Japan Limited, and GS GAMMA Advisors,
LLC.
Investing involves risk, including the possible loss of
principal. In general, the value of a fixed-income
security falls when interest rates rise and rises when interest
rates fall. Longer term bonds are more sensitive to interest rate
changes and subject to greater volatility than those with shorter
maturities. During periods of declining rates, the interest rates
on floating rate securities generally reset downward and their
value is unlikely to rise to the same extent as comparable fixed
rate securities.. High yield and unrated debt securities are
at a greater risk of default than investment grade bonds and may be
less liquid, which may increase volatility. Investors in
asset-backed securities, including mortgage-backed securities
and collateralized loan obligations (“CLOs”), generally
receive payments that are part interest and part return of
principal. These payments may vary based on the rate loans are
repaid. Some asset-backed securities may have structures that make
their reaction to interest rates and other factors difficult to
predict, making their prices volatile and they are subject to
liquidity and valuation risk. CLOs bear similar risks to investing
in loans directly, such as credit, interest rate, counterparty,
prepayment, liquidity, and valuation risks. Loans are often below
investment grade, may be unrated, and typically offer a fixed or
floating interest rate.
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Media Contact Gerard
CarneyGuggenheim Partners
310.871.9208Gerard.Carney@guggenheimpartners.com