2.08.2019 55

Seek high yield opportunities, but be aware of liquidity conditions


2 August, 2019

> 10 minutes
Seek high yield opportunities, but be aware of liquidity conditions

2 August, 2019

> 10 minutes


Three main themes driving investing opportunities

Theme 1 - Central banks dovishness

  • Low rates and accommodative central bank policies translate into lower funding costs and easier financial conditions for HY companies
  • When the Fed and the markets get onto different pages volatility spikes
  • The market may have gone too far in terms of rate cut expectations, but we expect the Fed to manage expectations

Theme 2 - Benign default outlook

  • We expect the default outlook for the next quarters to remain stable towards year end and just slightly increasing in H1 2020
  • Both in the US and in Europe the percentage of bonds trading at distress levels (more than 1,000bos spread) remains contained, with differences across sectors

Theme 3 - Diverging technical and fundamental dynamics

  • Going global in HY allows to benefit from the favourable fundamental and technical backdrop for European HY and EM HY that also offer appealing spreads;
  • Diverging technical and fundamental dynamics result in opportunities to actively select bonds in different regions and sectors


To find out more, download the full paper

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