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October 29, 2019

Guggenheim Fourth Quarter 2019 High-Yield and Bank Loan Outlook: Don’t Be Tempted by CCC-Rated Bonds and Loans

NEW YORK, NY – Guggenheim Investments, the global asset management and investment advisory business of Guggenheim Partners, today provided its Fourth Quarter 2019 High-Yield and Bank Loan Outlook. Titled “Don’t Be Tempted by CCC Bonds and Loans,” the report discusses the risk that spreads on lower-quality corporate bonds and bank loans are more likely to widen than tighten from here.

Among the highlights in the 16-page report:

  • At three-year wides, spreads might look appealing. However, when we compare the potential upside in another year of coupon-clipping and some spread tightening to the potential downside in a year of spreads widening and high defaults, current CCC spreads are not enough compensation to justify the risk.
  • As of Sept. 30, 2019, high-yield CCC spreads are at 1,037 basis points, while CCC loans are at 1,329 basis points. Both are at their widest levels since November 2016.
  • Exposure to CCC-rated debt in total leveraged credit (aggregating high-yield bonds and institutional loans) is only 8 percent, the lowest since 2000.
  • Although the market exposure to CCC is already smaller than in the past, investors should continue to limit exposure to this rating category despite recent cheapening because of the asymmetry of potential spread outcomes.
  • In a bear market scenario, we think CCC corporate bond spreads could widen by another 1,300 basis points, while our analysis of a bull market scenario suggests they could tighten by 430 basis points.

For more information, please visit www.guggenheiminvestments.com.


About Guggenheim Investments

Guggenheim Investments is the global asset management and investment advisory division of Guggenheim Partners, with more than $213 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 295+ 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.

 

Media Contact

Gerard Carney
Guggenheim Partners
310.871.9208
Gerard.Carney@guggenheimpartners.com

 

1Guggenheim Investments assets under management are as of 9.30.2019. The assets include leverage of $11.8bn for assets under management. Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Funds Distributors, LLC, GS GAMMA Advisors, LLC, Guggenheim Partners Europe Limited, and Guggenheim Partners India Management.

Investing involves risk, including the possible loss of principal. Investments in fixed-income instruments are subject to the possibility that interest rates could rise, causing their value to decline. 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.

One basis point is equal to 0.01 percent.

This material is distributed or presented for informational or educational purposes only and should not be considered a recommendation of any particular security, strategy or investment product, or as investing advice of any kind. This material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. The content contained herein is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.

This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.



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